| Vidya Wires Private Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ratings at 'CRISIL BBB+/Stable/CRISIL A2' on the bank facilities of Vidya Wires Private Limited (VWPL).
The ratings continue to reflect the extensive experience of company’s promoter, strong distribution network with established clientele, efficient working capital management and moderate financial risk profile. These strengths are partially offset by exposure to intense competition and susceptibility to slowdown in the end-user industries. |
Key Rating Drivers & Detailed Description Strengths:
The three-decade-long experience of the promoter, and their in-depth understanding of market dynamics will continue to support business risk profile. The copper wires industry is highly competitive, with unorganised players cornering significant market share. Nevertheless, the company has an established its market position, driven by a reputed clientele of original equipment manufacturers and strong distribution network. As a result, revenue had grown y-o-y by 41% to Rs 913 crore in fiscal 2022 largely on account of improved average sales realisation and 7% volume growth. The revenue growth further continued with estimated revenue of Rs 260 crore during Q1FY23 against Rs 199 crore during Q1FY22 backed by volume growth of around 19% and remaining through improvement in average sales realisation.
VWPL has demonstrated efficient working capital management as reflected in gross current assets (GCA) of 72 days as on March 31, 2022 on the back of low inventory (19 days) and moderate receivables period (43 days) as on March 31, 2022. Also, inventory is fully order-backed, and the company does not take any risk related to copper prices.
Financial risk profile is marked by moderate networth of Rs 80 crore, aided by moderate steady accretion to reserves. VWPL’s gearing and total outside liabilities to adjusted networth (TOLTNW) ratio though has moderated from previous year’s level, they remain healthy. Company had gearing and TOLTNW ratios of 1.39 times and 1.36 times, respectively as on March 31, 2022. This moderation is driven by higher debt, external funding to support the rising working capital requirements (amidst the rising copper prices). Debt protection metrics were adequate, with interest coverage and net cash accruals to adjusted debt ratios of 9.2 times and 21% respectively for fiscal 2022. In absence of large debt funded capex and/or large incremental working capital bank borrowings, the financial risk profile expected to improve over the medium term.
Weaknesses:
Intense competition and limited value addition in the copper winding wires industry, which is dominated by the unorganised sector, restricts the ability of organised players such as VWPL to command a premium pricing. Hence, operating margin has been modest at 3.2-4% over the four fiscals through 2022.
The company derives its revenue from electrical equipment manufacturers. Hence, its growth is directly correlated with the order book of these electrical equipment manufacturers from the power transmission sector. However, this risk is mitigated by income from other sectors such as automobiles, consumer durables and other capital goods. |
Liquidity: Adequate Liquidity is adequate with expected net cash accrual of Rs 15-19 crore against annual repayment obligations of Rs 2-4 crore over the medium term. VWPL’s working capital management continues to remain efficient however the rising copper prices meant higher reliance on working capital limits and increased utilization. Thus, the average bank limit bank utilization to stood around 87% through 12 months to May 2022. The company regularly got its working capital limits enhanced through the year to support the working capital requirements and ensured that its liquidity remained adequate. Liquidity remains supported by unsecured loans of Rs 10 crore (as on March 31, 2022) from promoters. Further, company does not have any large capex plans over near to medium term. |
Outlook: Stable CRISIL Ratings believes VWPL will continue to benefit from the extensive promoter experience and its relationships with customers. Financial risk profile is expected to remain moderate over the medium term. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company VWPL was set up in 1982 by the promoter Mr Shyamsunder Rathi. The company manufactures insulated copper wires (enamelled copper winding wires along with strips, paper-covered copper wires, strips, and bare copper wires) at its facility in Anand, Gujarat. |
Key Financial Indicators
^Provisional |
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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||
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This Annexure has been updated on 07-Jul-22 in line with the lender-wise facility details as on 02-Aug-21 received from the rated entity.
Criteria Details
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