| Sudisa Foundry Private Limited | ||||
| Rating Reaffirmed | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to annexure for Details of Instruments & Bank Facilities | ||||
| Detailed Rationale |
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CRISIL has reaffirmed its rating on long-term bank facilities of Sudisa Foundry Private Limited (Sudisa) at 'CRISIL BB+/Stable'. |
| Key Rating Drivers & Detailed Description |
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Strengths * Experienced promoters and long relationship with TML The company has been manufacturing automotive components since 2004. The director, Mr Sumit Kumar Agarwal, has been associated with the company since inception. The long industry experience has helped to develop strong domain knowledge. The association with TML for more than a decade has resulted in an established business relationship with this client and hence in sizeable and regular orders. * Efficient working capital management Gross current asset were moderate at 74 days as on March 31, 2017, and were at 65-85 days over the past three fiscals. Finished goods inventory of around 15 days is maintained for timely catering to client needs. Payment is received in 7-10 days from the despatch of the goods. Timely receipt of payment helps in efficient management of working capital. * Healthy financial risk profile In spite of a modest networth of around Rs 12 crore as on March 31, 2017, efficient working capital management has resulted in a comfortable capital structure. The gearing increased to 1.06 times as on March 31, 2017, from 0.15 time a year earlier due to debt-funded capital expenditure (capex), but remains comfortable. Low dependence on external borrowing has resulted in healthy debt protection metrics, as reflected in net cash accrual to total debt and interest coverage ratios of 0.25 time and 21.91 times, respectively, for fiscal 2017. Weaknesses * Exposure to risks related to timely operationalisation and stabilisation of the proposed project The company is undertaking a project for capacity expansion at a total cost of Rs 36 crore, to be funded through a term loan of Rs 18 crore, and the balance through internal cash accrual and promoter funds. Trial runs have been initiated and the project is expected to become operational by the end of February 2018 (revised from July 2017). The operationalisation of the project within the expected timeline and ramp up of scale as envisaged will remain key monitorables. * Customer concentration in revenue The company derives 85-90% of total revenue from TML. It supplies axle, suspension, and excavator parts to TML, with axle parts constituting 60-70% of the total sales. The high customer concentration risk is, however, mitigated by the longstanding relationship with TML. * Exposure to risks related to cyclicality in the CV segment The CV industry is cyclical in nature, with demand driven by a number of factors such as growth in industrial and agricultural production, freight movement, share of road transport in freight movement, changes in freight rates and fuel prices, profitability of truck operators and state transport undertakings, and government policies. Dependence on the CV segment poses a risk to revenue and profitability in case of a slowdown. |
| Outlook: Stable |
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CRISIL believes Sudisa will continue to benefit from the extensive industry experience of its promoters and their longstanding association with TML. The outlook may be revised to 'Positive' in case of timely implementation of the expansion project and successful ramp-up in scale of operations, leading to better net cash accrual. The outlook may be revised to 'Negative' in case of any significant time or cost overrun in commissioning the project, low cash accrual resulting from limited utilisation of the enhanced capacity, or a stretch in the working capital cycle, impacting the financial risk profile, especially liquidity. |
| About the Company |
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Sudisa was incorporated in 1956. The present promoter-directors, Mr Sumit Kumar Agarwal and Mr Dhiraj Kumar Agarwal took over the company in 2004, and now manage the daily operations. The company manufactures casting products, mainly for the automobile industry, and has capacity of 1000 tonne per month (tpm). The ongoing capex is likely to expand the capacity to 3500 tpm. The project is scheduled to commence commercial operations by the end of February 2018. |
| 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 - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||
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| For further information contact: | ||||||
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