Rating Rationale
March 14, 2019 | Mumbai
Shivalik Bimetal Controls Limited
'CRISIL A-/Stable/CRISIL A2+' assigned to bank debt
 
Rating Action
Total Bank Loan Facilities Rated Rs.34 Crore
Long Term Rating CRISIL A-/Stable (Assigned)
Short Term Rating CRISIL A2+ (Assigned)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has assigned its 'CRISIL A-/Stable/CRISIL A2+' ratings to the bank facilities of Shivalik Bimetal Controls Limited (SBCL).
 
The ratings reflect the established presence of its promoters in the bimetal industry, leading market position and comfortable financial risk profile. These strengths are partially offset by volatility in input prices and foreign exchange (forex) rates, and working capital-intensive operations.

Key Rating Drivers & Detailed Description
Strengths
* Strong market position in the niche linear bimetals segment- The Company is one of the few manufacturers of bimetal parts and shunt resistors, leading to limited competition. Furthermore, SBCL caters to broad spectrum of applications, including switchgears, energy metres, and electrical applications, automotive and electronic devices. Growth is correlated with the electrical, electronics, and automotive industries. Turnover increased 35% in fiscal 2018 to Rs 160.4 crore. For the first nine months of fiscal 2019, operating income was Rs 145 crore and is estimated to touch around Rs 200 crore.
 
* Strong track record of key management ' Presence of more than three decades in the niche and highly specialised bimetal industry has enabled the promoter to sustain revenue despite industry downturns.

* Comfortable financial risk profile and adequate liquidity- Networth was large at Rs 84 crore as on March 31, 2018, because of steady accretion to reserves over the years. Gearing was healthy at 0.4 time. Debt protection metrics were robust, with interest coverage and net cash accrual to total debt ratios of 11.5 times and 0.5 time, respectively, for fiscal 2018.
 
Weaknesses
* Susceptibility to volatility in raw material prices and forex rates - Operating margin remains exposed to changes in commodity prices as metals like nickel and copper accounts for about 50% of total cost. Metal prices were highly volatile in the past and are expected to remain so, however, company is protected by order backed processing on highly customised products.
 
* Working capital-intensive operations: Gross current assets were 218 days as on March 31, 2018, because of sizeable inventory and high receivables. The company generally maintains raw material inventory of around 120 days as procurement is imported and includes a variety of alloys.
Liquidity

Net cash accrual is expected to be Rs 22-26 crore per annum, in fiscals 2019 and 2020 against annual debt repayment of Rs 2-5 crore. Unsecured loans of Rs 6.03 crore as on March 31, 2018, also support liquidity. Utilisation was 31% for the fund-based facility and 46% for the non-fund-based facility for the past 12 months ending December 2018. Current ratio was comfortable at 1.6 times as on March 31st 2018.

Outlook: Stable

CRISIL believes SBCL will continue to benefit from its established market position and experienced management. The outlook may be revised to 'Positive' if significant increase in scale of operations and operating margins, while efficiently managing working capital requirement, improves business risk profile. The outlook may be revised to 'Negative' if industry downturn impacts sales and profitability or any unexpected debt-funded capital expenditure weakens financial risk profile.

About the Company

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

Key Financial Indicators
As on/for the period ended March 31 Unit 2018 2017
Operating income Rs crore 160.4 118.6
Reported profit after tax Rs crore 15.9 8.6
PAT margins % 10.0 7.25
Adjusted debt/adjusted networth Times 0.42 0.40
Interest coverage Times 11.5 8.8

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) Rating assigned with outlook
NA Cash Credit NA NA NA 27.0 CRISIL A-/Stable
NA Letter of Credit NA NA NA 7.0 CRISIL A2+
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  27.00  CRISIL A-/Stable    --    --    --    --  -- 
Non Fund-based Bank Facilities  LT/ST  7.00  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 27 CRISIL A-/Stable -- 0 --
Letter of Credit 7 CRISIL A2+ -- 0 --
Total 34 -- Total 0 --
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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