Rating Rationale
May 12, 2021 | Mumbai
TTK Prestige Limited
Ratings reaffirmed at 'CRISIL AA / Stable / CRISIL A1+ '
 
Rating Action
Total Bank Loan Facilities RatedRs.136 Crore
Long Term RatingCRISIL AA/Stable (Reaffirmed)
Short Term RatingCRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL AA/Stable/CRISIL A1+' ratings on the bank facilities of TTK Prestige Ltd (TTK).

 

Healthy performance in the second and third quarters of fiscal 2021, driven by relaxation of lockdowns and pick-up in demand across categories and channels (including e-commerce) curbed the decline in revenue to 4% over the first nine months of fiscal 2021, compared with the previous fiscal. Despite lower volume, operating margin dropped slightly to 13.83% in fiscal 2021, from 13.69% in fiscal 2020, and was aided by lower advertising and travel cost and other measures undertaken to improve operating efficiency.

 

The second wave of the Covid-19 pandemic and the resultant lockdowns in fiscal 2022 may only have a limited impact on TTK, as demonstrated last year. Wide presence of TTK in the online and offline channels, sustained demand for branded cookware and appliances, strong brand equity, addition of new products and higher exports should support revenue growth of 9-10% over the medium term. Operating margin should remain stable at 13-14% as TTK largely passes on any hike in raw material prices and will benefit from better economies of scale with higher sales.

 

The ratings continue to reflect the strong financial risk profile, marked by heathy networth and negligible debt, and sufficient liquidity. The ratings also factor in the strong market position of TTK in the cookware and kitchen equipment space. These strengths are partially offset by exposure to intense competition from both organised and unorganised players, and susceptibility to volatility in raw material prices and foreign currency rates.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of TTK, TTK British Holdings Ltd, Horwood Homewares Ltd (Horwood) and Horwood Life Ltd, collectively referred to herein as TTK. Horwood is a wholly owned subsidiary of TTK, operating in the same business, with business and financial linkages. Moreover, CRISIL Ratings has amortised goodwill of Rs 113 crore on the acquisition of Horwood over five fiscals (2017-21).

 

Please refer Annexure - Details of Consolidation, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths

  • Robust market position in the kitchen equipment space, with sound operating capabilities: The company should be able to maintain its strong market position, driven by a wide distribution network and growing opportunities in the global market. Prestige is one of the strongest kitchen equipment brands, with a market share of around 35% in the domestic pressure cooker segment. The company is present across the entire range, which includes cookware, appliances, gas stoves, mixer-grinders, cleaning solutions and modular kitchens. Competing with global brands, it has also ventured into the luxury segment in categories such as dishwashers, built-in ovens and island chimneys through Prestige Lifestyle stores. The in-house product development team helps expand the product base and improve overall efficiency.

 

  • Healthy financial risk profile: The financial risk profile should remain stable over the medium term, backed by healthy cash accrual, a comfortable capital structure, nil outstanding debt (on a standalone basis), and robust debt protection metrics. CRISIL Ratings estimates networth to be sizeable at over Rs 1,300 crore as on March 31, 2021, up from Rs 1,201 crore as on March 31, 2020. Following the debt-funded acquisition undertaken in the past, debt is estimated around Rs 19 crore as on March 31, 2021.

 

Weaknesses

  • Exposure to intense competition: TTK has a healthy market share of about 35% in the domestic pressure cooker segment. In the inner-lid category, the company competes with established players such as Hawkins Cookers Ltd, which also holds a significant share of the pie. The multi-chain, large-format stores have further launched their own brands, in order to target customers looking for all products under one roof. Though the company is gradually increasing its market presence in the electric appliances segment by introducing new designs and products every year, it continues to faces competition from various regional players.

 

  • Susceptibility to volatility in raw material prices and currency rates: Operating margin remains susceptible to volatility in prices of key raw materials (steel and aluminium) and adverse movements in forex rates. Additionally, any change in regulatory policies on imports could affect the cost structure. The company has been successful in transferring cost hikes to end-customers in the past, but may still be partly vulnerable to any adverse movement in input cost.

Liquidity: Strong

Cash and cash equivalents were Rs 539 crore as on December 31, 2020. Furthermore, the fund-based limit of Rs 76 crore remained mostly unutilised in the 12 months through March 2021. Expected cash accrual of Rs 200-220 crore per fiscal should comfortably cover the annual capital expenditure of Rs 75-90 crore, and the long-term debt of around Rs 19 crore in fiscal 2022. With the gearing estimated at 0.01 time as on March 31, 2021, there is sufficient headroom to raise additional debt. The minimal working capital expense is likely to be met via available cushion in the bank limit.

Outlook Stable

CRISIL Ratings believes the business risk profile of TTK will continue to be supported by a healthy market position in the kitchen equipment segment. Furthermore, the strong balance sheet and adequate liquidity should help offset any impact of stressed business conditions.

Rating Sensitivity factors

Upward factors

  • Steady diversification in revenue streams and material improvement in market share in key product segments
  • Revenue growth of over 20% (in compounded terms) and operating margin of above 16%, leading to significant and sustained increase in cash accrual
  • Strengthening of the financial risk profile, especially liquidity

 

Downward factors

  • Significantly weak operating performance, due to a steady decline in revenue or operating margin (to less than 12%)
  • Any large, debt-funded capex or acquisition, or a significant stretch in working capital cycle, depleting the cash surplus and weakening the capital structure

About the Company

Set up as a private limited company in 1955, TTK went public in 1994. It is among the leading brands in the kitchen equipment space, especially in the pressure cooker segment. The product profile is diversified, with 31% of revenue coming from pressure cookers, 15% from cookware, 14% from gas stoves, 12% from mixer-grinders, and the remainder from other kitchen and home appliances and cleaning solutions. TTK is the flagship company of the TT Krishnamachari group of companies, which has interests in healthcare and consumer products and services.

 

For the first nine months of fiscal 2021, TTK reported, profit after tax of Rs 151 crore (Rs 176 crore in the corresponding period of fiscal 2020) on an operating income of Rs 1,589 crore (Rs 1,655 crore).

Key Financial Indicators*

As on / for the period ended March 31

 

2020

2019

Operating income

Rs crore

2,073

2,107

Profit after tax (PAT)

Rs crore

162

170

PAT margin

%

7.8

8.0

Adjusted debt / adjusted networth

Times

0.03

0.08

Interest coverage

Times

52.77

37.44

*Difference between the figures in the ‘key financial indicators’ table and the reported numbers of the company is on account of amortisation of goodwill on the acquisition of Horwood over five years.

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 crore)

Complexity level

Rating assigned with outlook

NA

Cash credit

NA

NA

NA

76.0

NA

CRISIL AA/Stable

NA

Letter of credit and bank guarantee

NA

NA

NA

60.0

NA

CRISIL A1+

 

Annexure – List of entities consolidated

Name of the entity

Extent of consolidation

Rationale for consolidation

TTK Prestige Limited

Full

Parent

TTK British Holdings Limited

Full

Subsidiary with strong business and financial linkages

Horwood Homewares Limited

Full

Subsidiary with strong business and financial linkages

 

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 76.0 CRISIL AA/Stable   -- 30-07-20 CRISIL AA/Stable 30-10-19 CRISIL AA/Stable 03-10-18 CRISIL AA/Stable CRISIL AA-/Positive
Non-Fund Based Facilities ST 60.0 CRISIL A1+   -- 30-07-20 CRISIL A1+ 30-10-19 CRISIL A1+ 03-10-18 CRISIL A1+ CRISIL A1+
Commercial Paper ST   --   --   -- 30-10-19 Withdrawn 03-10-18 CRISIL A1+ CRISIL A1+
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 76 CRISIL AA/Stable Cash Credit 76 CRISIL AA/Stable
Letter of credit & Bank Guarantee 60 CRISIL A1+ Cash Credit 34 Withdrawn
- - - Letter of credit & Bank Guarantee 60 CRISIL A1+
Total 136 - Total 170 -
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
CRISILs Criteria for rating short term debt
CRISILs Criteria for Consolidation

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