Rating Rationale
April 16, 2020 | Mumbai
Shivalik Bimetal Controls Limited
Ratings Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.71 Crore
Long Term Rating CRISIL A-/Stable (Reaffirmed)
Short Term Rating CRISIL A2+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL A-/Stable/CRISIL A2+' ratings on bank facilities of Shivalik Bimetal Controls Limited (SBCL).
The ratings continue to reflect the longstanding presence of SBCL's promoters 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
* 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 performance of the electrical, electronics, and automotive industries. Turnover grew 21% in fiscal 2019, to Rs 195.14 crore. Operating income stood at Rs 140 crore for the first nine months of fiscal 2020, and is estimated to be around Rs 185 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 promoters to ensure sustained revenue growth, despite industry downturns.

* Comfortable financial risk profile and adequate liquidity: Financial risk profile was marked by a large networth of Rs 104.81 crore, as on March 31, 2019, driven by steady accretion to reserves. Gearing was healthy at 0.4 time as on the same date. Debt protection metrics were robust, with interest coverage and net cash accrual to total debt ratios of 11.6 times and 0.56 time, respectively, for fiscal 2019.
* 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 partly offset by order-backed processing undertaken by SBCL on highly customised products.

* Working capital-intensive operations: Gross current assets stood at 218 days as on March 31, 2019, because of sizeable inventory and large receivables. The company generally maintains raw material inventory of around 120 days as procurement is imported, and includes a variety of alloys.
Liquidity Strong

Net cash accrual of Rs 17-18 crore is expected per annum, in fiscals 2020 and 2021, against the maturing debt of Rs 2.8-4.8 crore. Unsecured loans of Rs 6.03 crore as on March 31, 2019, also support liquidity. Utilisation of the fund-based and non-fund based facilities averaged 37% and 24%, respectively, for the 12 months ending February 29, 2020. Current ratio was comfortable at 1.8 times as on March 31, 2019.

Outlook: Stable

CRISIL 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 bps)
* Better working capital management
Downward factors
* Decline in profitability by 250 basis points or stretch in working capital cycle
* Large debt-funded capital expenditure, weakening the capital structure
About the Company

SBCL was set up in 1984, by the promoters, Mr SS Sandhu and Mr NS Ghumman. The company manufactures thermostatic bimetal/trimetal strips, components, shunt resistors, clad metals etc. Units are in Chambaghat, Himachal Pradesh. It is also listed on Bombay Stock Exchange (BSE).

Key Financial Indicators
As on / for the period ended March 31   2019 2018
Operating income Rs crore 195.19 160.4
Reported profit after tax Rs crore 23.08 15.9
PAT margin % 11.8 10.0
Adjusted debt/adjusted networth Times 0.43 0.42
Interest coverage Times 11.63 8.97
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) Rating assigned with outlook
NA Cash Credit## NA NA NA 26.0 CRISIL A-/Stable
NA Letter of credit &
Bank Guarantee
NA Working Capital Facility* NA NA NA 25.0 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 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  51.00  CRISIL A-/Stable      28-03-19  CRISIL A-/Stable    --    --  -- 
            14-03-19  CRISIL A-/Stable           
Non Fund-based Bank Facilities  LT/ST  20.00  CRISIL A2+      28-03-19  CRISIL A2+    --    --  -- 
            14-03-19  CRISIL A2+           
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
Cash Credit## 26 CRISIL A-/Stable Cash Credit# 41 CRISIL A-/Stable
Letter of credit & Bank Guarantee 20 CRISIL A2+ Letter of credit & Bank Guarantee 25 CRISIL A2+
Working Capital Facility* 25 CRISIL A-/Stable Long Term Loan 5 CRISIL A-/Stable
Total 71 -- Total 71 --
##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
#Interchangeable with Packing Credit, Foreign Currency Packing Credit, Foreign Bill Purchase, Foreign Currency Foreign Bill Discounting, Foreign Bill Negotiation, Bill Purchase, Document against Acceptance Bill Purchase, Sales Bill Purchase, Bill Purchase-Letter of Credit/Document against Acceptance, Foreign Currency Working Capital Demand Loan.
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies

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