Rating Rationale
September 28, 2020 | Mumbai
Ujaas Energy Limited
Ratings downgraded to 'CRISIL B-/Negative/CRISIL A4'
 
Rating Action
Total Bank Loan Facilities Rated Rs.437 Crore
Long Term Rating CRISIL B-/Negative (Downgraded from 'CRISIL BB/Negative')
Short Term Rating CRISIL A4 (Downgraded from 'CRISIL A4+')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has downgraded its ratings on the bank facilities of Ujaas Energy Limited (UEL) to 'CRISIL B-/Negative/CRISIL A4' from 'CRISIL BB/Negative/CRISIL A4+.
 
The downgrade reflects sharp deterioration in the business risk profile in fiscal 2020 as against CRISIL's earlier expectation coupled with withdrawal of fund support by promoters. Business risk profile is further expected to remain subdued for fiscal 2021 thereby weakening liquidity profile of UEL. Working capital cycle is stretched with sizeable debtors and inventory. Any significant delays in realizing payments from customers could further elongate working capital cycle thereby deteriorating liquidity position. 
 
CRISIL has taken into cognizance the moratorium on interest and principal granted by the banker for six months ending August 2020, as permitted by the Reserve Bank of India.
 
CRISIL has also taken into cognizance that an operational creditor had filed a case in the National Company Law Tribunal (NCLT) for non-clearance of dues of Rs 18.67 lakh. The NCLT admitted this application, ordering the commencement of a corporate insolvency resolution process against UEL. Resolution of the case would be a key rating monitorable.
 
The ratings continues to factor in working capital-intensive operations, susceptibility to regulatory changes, and weak debt protection metrics. These weakness is partially offset by extensive experience of the promoters.

Key Rating Drivers & Detailed Description
Weaknesses:
* Working capital-intensive operations: Gross current assets (GCA) are at ~1200 days as on March 31, 2020, as against 561 days, a year earlier. GCA is driven by high debtor and inventory of ~735 days & ~260 days respectively as on March 31, 2020. Operations are expected to remain working capital intensive over the medium term. Timely receipt from debtors will remain a key monitorable.
 
* Weak debt protection metrics: Debt protection metrics are weak, with interest coverage ratio expected to remain below 1 time going ahead.
 
* Susceptibility to regulatory changes: UEL's business is susceptible to regulatory changes concerning domestic procurement of solar cells, as reflected in the 65% fall in revenue and stretched working capital cycle. Additionally, revenue remains susceptible to capital expenditure (capex) to be incurred for setting up solar power plants.
 
Strength:
* Extensive experience of the promoters: Benefits from over three-decade-long experience of the promoters in the power sector and strong relationships with stakeholders will continue to support the business.
Liquidity Poor

Liquidity is poor as reflected in expected net cash accruals of Rs 1-2 crore per annum over the medium term which would be insufficient to cover yearly debt obligation of ~Rs 10.4 crore. Bank limit are fully utilisation currently thereby leaving no cushion in case of exigencies. Unencumbered cash balance are modest at around Rs 0.4-0.5 crore. UEL has paid off majority of unsecured loan extended by the promoter thereby further constraining liquidity.

Outlook: Negative

CRISIL believes UEL's liquidity is expected to remain under pressure over the medium term in case of delayed payment from customers

Rating Sensitivity factors
Upward factors
* Significant improvement in liquidity due infusion of equity or a sizeable realization of payments from customers or restructuring of debt
* Ratio of net cash accruals to principal repayments of over 1.5 times
 
Downward factors
* Any delays in upcoming debt obligation
* Net cash accruals of less than Rs 0.5 crore
* Increase in working capital requirement, larger-than-expected, debt-funded capital expenditure or acquisition, or more-than-anticipated dividend payout, weakening the financial risk profile, particularly liquidity
About the Company

UEL, formerly M and B Switchgears Pvt Ltd, was incorporated in 1979. The company is engaged in the sale of solar power and setting up solar projects across three segments: engineering procurement and construction, solar park, and rooftop. It also provides operations and maintenance services for these assets. The company has an installed capacity of 14 megawatt (MW) of solar power; over the years, it has set up more than 235 MW of solar power plants. UEL has also recently ventured into the electric two-wheeler industry by launching E-Spa. Mr Shyam Sunder Mundra is the promoter, and operations are managed by his sons, Mr Vikalp Mundra and Mr Anurag Mundra.

Key Financial Indicators
Particulars Unit 2020 2019
Revenue Rs.Crore 54.54 156.1
Profit after tax Rs.Crore (13.35) 6.6
Profit after tax margin Percentage (24.4) 4.23
Adjusted Debt/Adjusted Networth Times 0.45 0.64
Interest coverage Times (0.34) 1.21

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL 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. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
 ISIN Name of instrument Date of allotment Coupon
rate (%)
Maturity date Issue size
(Rs.Crore)
Complexity Levels Rating Assigned with Outlook
NA Bank Guarantee NA NA NA 62.37 NA CRISIL A4
NA Cash Credit NA NA NA 29.5 NA CRISIL B-/Negative
NA Letter of Credit NA NA NA 34.2 NA CRISIL A4
NA Proposed Fund-Based Bank Limits NA NA NA 233.88 NA CRISIL B-/Negative
NA Standby Fund Based Working Capital NA NA NA 8 NA CRISIL B-/Negative
NA Term Loan NA NA Jan-2026 69.05 NA CRISIL B-/Negative
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  340.43  CRISIL B-/Negative      25-11-19  CRISIL BB/Negative  28-08-18  CRISIL BBB-/Negative  31-03-17  CRISIL A-/Stable  -- 
            06-06-19  CRISIL BB+/Stable  28-06-18  CRISIL BBB+/Negative       
Non Fund-based Bank Facilities  LT/ST  96.57  CRISIL A4      25-11-19  CRISIL A4+  28-08-18  CRISIL A3  31-03-17  CRISIL A2+  -- 
            06-06-19  CRISIL A4+  28-06-18  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
Bank Guarantee 62.37 CRISIL A4 Bank Guarantee 62.37 CRISIL A4+
Cash Credit 29.5 CRISIL B-/Negative Cash Credit 29.5 CRISIL BB/Negative
Letter of Credit 34.2 CRISIL A4 Letter of Credit* 34.2 CRISIL A4+
Proposed Fund-Based Bank Limits 233.88 CRISIL B-/Negative Proposed Fund-Based Bank Limits 233.88 CRISIL BB/Negative
Standby Fund Based Working Capital 8 CRISIL B-/Negative Standby Fund Based Working Capital 8 CRISIL BB/Negative
Term Loan 69.05 CRISIL B-/Negative Term Loan 69.05 CRISIL BB/Negative
Total 437 -- Total 437 --
*Interchangeable with bank guarantee of Rs.14.2 crore
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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