Rating Rationale
May 08, 2025 | Mumbai
The Hi-Tech Gears Limited
Rating upgraded to 'Crisil A-/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.183 Crore
Long Term RatingCrisil A-/Stable (Upgraded from 'Crisil BBB+/Positive')
Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

Crisil Ratings has upgraded its rating on the long-term bank facilities of The Hi-Tech Gears Limited (THGL, part of the Hi-Tech group) to ‘Crisil A-/Stable’ from ‘Crisil BBB+/Positive.

 

The upgrade reflects an improvement in the financial risk profile of the group, driven by better accretion to reserves and measures undertaken by the management to reduce dependence on external debt. The leverage position, as indicated by total outside liabilities to tangible networth (TOL/TNW) ratio, has improved steadily over the years, and is estimated to be less than one time as on March 31, 2025, down from around 1.2 times as on March 31, 2024. Moreover, steady operating profitability led to comfortable debt protection metrics. Continued accretion to reserve and absence of any sizeable, debt-funded capital expenditure (capex) should strengthen the financial risk profile over the medium term. Liquidity has also improved as reflected in lower bank limit utilisation, which averaged around 40% for the 12 months through December 2024 (from nearly 80% in the preceding 12 months). Net cash accrual remains adequate for the working capital requirement and maturing term debt obligation.

 

The upgrade also factors in the improvement in the business risk profile of the group, particularly its operating margin, which should sustain at 13-14% during fiscal 2025 (14.4% reported over April to December 2024). Consistent measures undertaken by the management, including productivity improvement have led to sustained growth in profitability of subsidiaries, while maintaining the profitability at the parent entity level. Though business volume could have moderated slightly during fiscal 2025 (vis-a-the previous year), steady operating profitability has aided the overall business risk profile; revenue is estimated to be around Rs 1,000 crore during fiscal 2025 (~Rs 700 crore reported for the first nine months). Going forward, improved offtake from customers, leading to sustained and significant improvement in volume, along with a steady operating margin, remains a key monitorable.

 

The ratings continue to reflect the extensive experience of the promoters, which resulted in established market position and healthy financial risk profile. These strengths are partially offset by working capital-intensive operations and moderate scale of operations.

Analytical Approach

Ontario Inc, Canada is a wholly owned subsidiary of THGL, and has various step-down subsidiaries. Hence, Crisil Ratings has taken a consolidated approach with regards to all these entities, collectively referred to as the Hi-Tech group, considering the parent and subsidiary relationship and the common promoters.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

Extensive experience of the promoters resulted in established market position: The three-decade-long experience of the promoter in the auto component industry, his sound understanding of market dynamics and healthy relationships with customers and suppliers, will continue to support the business risk profile. The company is taking multiple measures to increase its market share by adding more original equipment manufacturers (OEMs) such as CNH, Dana, Stackpole, Mahindra, Harley etc. The group recorded an operating income of around Rs 712 crore for the first nine months of fiscal 2025. Focus on addition of new products and new customers in each segment should strengthen the overall business risk profile.

 

Healthy financial risk profile: Continued accretion to reserves has improved the overall financial flexibility of the company. Resultantly, networth is projected to improve to Rs 450-475 crore as on March 31, 2026 (from around Rs 420 crore as on March 31, 2025). The total outside liabilities to adjusted networth ratio is estimated to be less than one time as on March 31, 2026, thus providing the company sufficient headroom to raise additional debt. With continuous debt reduction over the past few fiscals and improvement in operating profitability, debt protection metrics remain comfortable, with interest coverage and net cash accrual to adjusted debt ratios expected to range from 4-5 times and 0.5-0.75 time, respectively, in fiscal 2026. Going ahead, expansion in the scale of operations and absence of any sizeable, debt-funded capex plans should enhance the accretion to reserves. Improvement in financial risk profile remains a key monitorable.

 

Weaknesses:

Working capital-intensive operations: Operations remain working capital-intensive owing to the commoditised nature of business. Gross current assets (GCAs) were high in the range of 140-150 days over the three fiscals ended March 31, 2025, and are likely to be rangebound as on March 31, 2026. GCAs are driven by extended credit provided to customers to combat competition, and the huge inventory, comprising raw material and finished products, given the diverse product mix. With enhancement in bank limit, utilisation has improved to 37% on average in the 12 months ended December 31, 2024, from around 79% for the 12 months through November 2023. However, with an increase in scale of operations, reliance on short-term debt may increase further. The ability of the company to efficiently manage its working capital and limit reliance on debt will be monitored.

 

Moderate scale of operations: The group has reported revenue of around Rs 1,000 crore during fiscal 2025. Muted activity in the commercial automobile industry, coupled with geopolitical tensions, led to lower revenue over fiscals 2024 and 2025. Going forward, onboarding of new clients should help expand the overall scale of operations. Given the uncertainty around imposition of tariffs in the US the overall growth in revenue, along with sustenance of the healthy operating margin, remains a key sensitivity factor.

Liquidity: Strong

Bank limit utilisation was moderate, averaging 37% for the 12 months ending December 31, 2024, as against ~79% for the 12 months through November 2023. Expected net cash accrual of Rs 100-110 crore per fiscal should suffice to meet the yearly debt obligation of Rs 35-40 crore over the medium term, resulting in cushion of over 2 times. Current ratio is  expected to remain healthy at 1.7-1.9 times as on March 31, 2026. Healthy cash balance of Rs 20-25 crore also supports liquidity.

Outlook: Stable

Crisil Ratings believe the financial risk profile of the company shall continue to improve with reduced term debt obligation and sufficient net cash accrual to cover the working capital expenses.

Rating Sensitivity Factors

Upward Factors

  • Sustained and significant growth in operating income, along with steady operating margin of 14-15%, leading to higher-than-expected net cash accrual
  • Efficient working capital management, reducing reliance on bank debt and thus, strengthening the overall financial risk profile of the group

 

Downward Factors

  • Decline in revenue or operating margin (to 9-10%), leading to lower-than-expected net cash accrual 
  • Stretch in the working capital cycle or any large, debt-funded capex, weakening the financial risk profile, particularly liquidity.

About the Group

THGL, incorporated in 1986, is a public limited group, listed on the Bombay Stock Exchange and National Stock Exchange. The group manufactures auto components, particularly transmission gears. It has three manufacturing plants in India: two in Bhiwadi, Rajasthan, and one in Manesar, Haryana. Mr Deep Kapuria is the founder and promoter of the group.

 

The group reported operating income of Rs 712 crore and profit after tax (PAT) of Rs 30.65 crore in the first nine months of fiscal 2025, as against Rs 820 crore and Rs 96.43 crore, respectively, in the first nine months of fiscal 2024.

Key Financial Indicators

As on/for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

1,108.76

1,169.46

Reported profit after tax

Rs crore

114.25

23.11

PAT margin

%

10.30

1.98

Adjusted debt/Adjusted networth

Times

0.77

1.69

Interest coverage

Times

4.07

4.37

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. 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 Levels Rating Outstanding with Outlook
NA Proposed Working Capital Facility NA NA NA 9.00 NA Crisil A-/Stable
NA Working Capital Demand Loan NA NA NA 30.00 NA Crisil A-/Stable
NA Working Capital Facility NA NA NA 89.00 NA Crisil A-/Stable
NA Working Capital Loan NA NA NA 30.00 NA Crisil A-/Stable
NA Long Term Loan NA NA 31-Mar-27 25.00 NA Crisil A-/Stable

Annexure – List of Entities Consolidated

Names of entities consolidated

Extend of consolidation 

Rationale for consolidation 

THGL

Full

Common management and similar line of business

2545887 Ontario Inc. Canada

Wholly owned subsidiary, common management and similar line of business

Teutech Industries Inc

Step-down subsidiary, common management and similar line of business

Teutech Holding Corporation

Teutech Leasing Corporation

Teutech LLC

Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 183.0 Crisil A-/Stable   -- 03-12-24 Crisil BBB+/Positive 16-05-23 Crisil BBB+/Stable 08-04-22 Crisil BBB+/Stable Crisil BBB+/Stable
      --   -- 08-02-24 Crisil BBB+/Positive   -- 29-03-22 Crisil BBB+/Stable --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Long Term Loan 25 HDFC Bank Limited Crisil A-/Stable
Proposed Working Capital Facility 9 Not Applicable Crisil A-/Stable
Working Capital Demand Loan 30 The Federal Bank Limited Crisil A-/Stable
Working Capital Facility 30 Standard Chartered Bank Crisil A-/Stable
Working Capital Facility 30 The Federal Bank Limited Crisil A-/Stable
Working Capital Facility 29 ICICI Bank Limited Crisil A-/Stable
Working Capital Loan 30 HDFC Bank Limited Crisil A-/Stable
Criteria Details
Links to related criteria
Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)
Basics of Ratings (including default recognition, assessing information adequacy)
Criteria for consolidation

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