Key Rating Drivers & Detailed Description

Strengths:

Extensive promoters' experience and established market position supported by its moderate order book: The promoters have an experience of more than three decades in material handling solutions industry. This has given them an understanding of the dynamics of the market and enabled them to establish strong relationships with its suppliers and customers. The company has successfully completed nearly 500 Projects in last 2 decades and enjoys long-term association with its key customers such as Tata Motors Limited, Ashok Leyland Limited, Vedanta Limited, Hindalco Industries Ltd, National Aluminium Company Limited, Mahindra & Mahindra Limited, Skoda Volkswagen, etc. Being the exclusive licensee of Daifuku Co. Ltd (one of the world's largest material handling systems integrator) in India, WPL has a competitive advantage. Further, WPL has a moderate order book of Rs.70.77 crore as on September 30, 2022, which provides near term revenue visibility.

Healthy financial profile: WPL's capital structure has been at healthy level due to lower reliance on external funds yielding gearing of 0.08 time and low total outside liabilities to adjusted tangible networth (TOL/ANW) of 0.93 time for year ending on March  31, 2022. WPL's debt protection measures have also been sound due to comfortable leverage and healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 5.88 times and 1.84 times for fiscal 2022. WPL's financial risk profile is expected to sustain over medium term.

Weaknesses:

Exposure to risks related to high dependence on cyclical automobile and aluminum sector: The majority of WPL's conveyors are supplied to the automobile and aluminum industries. Hence, the company's operations are susceptible to the inherent cyclicality associated with these industries. While WPL has, in the past few years, mitigated the sector concentration risk by expanding its exposure to other sectors, the current order book primarily consists of companies from the automotive and aluminum segments and hence, CRISIL Ratings believes that the WPL will remain susceptible to the inherent cyclicality in these sectors.

Working capital intensive operations: Gross current assets were at 222-300 days over the three fiscals ended March 31, 2022, which reflects the working capital intensity of operations. Its large working capital requirements arise from high debtor and inventory levels. However, the company was able to significantly improve its debtor collection from 223 days in FY21 to 123 days in FY22 and also reduced inventory holding from 51 days in FY21 to 35 days in FY22. Timely collections have helped to pay off creditors which has reduced from 248 days in FY21 to 128 days in FY22.

Rating Sensitivity factors

Upward factors:

• Sustained improvement in scale of operation by 20% and sustenance of operating margin above 8%, leading to higher cash accruals above Rs. 8 crores on a consistent basis
• Improvement in working capital cycle, with gross current assets improve to 150 days and sustenance of healthy financial risk profile.

Downward factors:

• Decline in scale of operations and/or profitability margin leading to net cash accrual lower than Rs 5 crore on a consistent basis.
• Witnesses a substantial increase in its working capital requirements and/or any large debt-funded capital expenditure, thus weakening its liquidity and financial profile.

Key Financial Indicators

Annexure - Details of Instrument(s)

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