Rating Rationale
November 21, 2017 | Mumbai
Uttam (Bharat) Electricals Private Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.40 Crore
Long Term Rating CRISIL BB+/Stable (Reaffirmed)
Short Term Rating CRISIL A4+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its ratings on bank facilities of Uttam (Bharat) Electricals Private Limited (Uttam Bharat) at 'CRISIL BB+/Stable/CRISL A4+'.

The ratings continue to reflect the extensive experience of promoters in the transformer industry, and moderate financial risk profile. These rating strengths are partially offset by the large working capital requirement, and volatility in operating margin.

Analytical Approach

CRISIL has treated unsecured loans of Rs 5.25 crore outstanding as on March 31, 2017, extended by the promoters of Uttam Bharat, as neither debt nor equity as these are expected to remain in the business over the medium term.

Key Rating Drivers & Detailed Description
Strengths
* Extensive experience of promoters in transformer industry
The two decade-long experience of the promoters, in the transformer industry, their healthy relationships with customers and suppliers, and strong track record of catering to state distribution companies (discoms), will continue to support the business risk profile.

* Moderate financial risk profile: As on March 31, 2017, networth was moderate at Rs 19.15 crore and gearing low at 0.61 time. Debt protection metrics were adequate, with interest coverage ratio of around 1.6 times and net cash accrual to total debt ratio of 0.10 time, in fiscal 2017, aided by low reliance on external debt and zero debt on books.

Weaknesses
* High working capital intensity in operations: Gross current assets stood at 166 days, as on March 31, 2017, driven by receivables and inventory of 91 and 56 days, respectively. Delay in realisation of payments from state discoms, led to a significant increase in receivables outstanding for over six months to Rs 5.14 crore in fiscal 2017, against Rs 1.44 crore in fiscal 2016.

* Volatile operating margin
Operating margin has fluctuated sharply from 4.2% to 11.2% over the five fiscals through March 2017, mainly due to the tender-based nature of operations, and diversified product profile, where the margin on different grades of transformers varies as per their capacities. Furthermore, intense competition and fluctuation in prices of raw materials such as aluminum, copper and steel, also have an adverse impact on the margin.
Outlook: Stable

CRISIL believes Uttam Bharat will continue to benefit from the extensive experience of its promoters. The outlook may be revised to 'Positive' if the company reports significant revenue growth, sustained improvement in profitability and better working capital management. The outlook maybe revised to 'Negative' if low revenue and profitability, leading to lower-than-expected cash accrual, or any large debt-funded capital expenditure, weakens the financial risk profile.

About the Company

Uttam Bharat was set up by the late Mr Purushottam Agarwal, and his sons, Mr Atul Agarwal, Mr Akhil Agarwal, and Mr Alok Agarwal, at Rajasthan, in 1991. Mr Purushottam Agarwal started repairing transformers in 1983, through a partnership firm, Uttam Bharat Electricals; the firm started manufacturing distribution transformers in 1987. Subsequently, the promoters set up Uttam Bharat to take over the business of this partnership firm. Uttam Bharat has two manufacturing facilities in Jaipur.

Key Financial Indicators
Particulars Unit 2017 2016
Revenue Rs crore 96.26 86.83
Profit After Tax (PAT) Rs crore 0.88 0.92
PAT Margins % 0.9 1.1
Adjusted debt/adjusted networth Times 0.61 0.48
Interest coverage Times 1.57 1.65

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)
Rating assigned with outlook
NA Bank Guarantee NA NA NA 13 CRISIL A4+
NA Letter of Credit NA NA NA 13 CRISIL A4+
NA Overdraft NA NA NA 11 CRISIL BB+/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 3 CRISIL BB+/Stable
Annexure - Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  14  CRISIL BB+/Stable    No Rating Change    No Rating Change    No Rating Change  24-07-14  CRISIL A4+  CRISIL BB+/Stable 
                    06-08-14  CRISIL BB+/Stable   
Non Fund-based Bank Facilities  LT/ST  26  CRISIL A4+    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A4+ 
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
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 13 CRISIL A4+ Bank Guarantee 12 CRISIL A4+
Letter of Credit 13 CRISIL A4+ Letter of Credit 12 CRISIL A4+
Overdraft 11 CRISIL BB+/Stable Overdraft 11 CRISIL BB+/Stable
Proposed Long Term Bank Loan Facility 3 CRISIL BB+/Stable Proposed Long Term Bank Loan Facility 5 CRISIL BB+/Stable
Total 40 -- Total 40 --
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
Rating Criteria for Engineering Sector
CRISILs Criteria for rating short term debt

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