| Austin Engineering Company Limited | ||||||
| Ratings Reaffirmed and Withdrawn | ||||||
| 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its ratings on the bank facilities of Austin Engineering Company Ltd (AECL; part of the AECL group) and simultaneously withdrawn the ratings at the company's request and on receipt of no-objection certificate from its banker. The withdrawal is in-line with CRISIL Ratings' policy on withdrawal of bank loan ratings.
The ratings continue to reflect the AECL group’s moderate capital structure and its long market presence in the industrial bearings segment. These strengths are partially offset by limited bargaining power with customers, working capital-intensive operations, and exposure to volatility in profitability, raw material prices and foreign exchange (forex) rates. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of AECL and its subsidiary, Austin Engineering Company (AEC; formerly, Accurate Engineering Inc). This is primarily because the entities, together referred to as the AECL group, have operational synergies, wherein AEC acts as a marketing arm for AECL in the US.
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: Moderate capital structure: Networth and gearing were estimated around Rs 50 crore and 0.12 time, respectively, as on March 31, 2021. Losses incurred during fiscal 2020 and fiscal 2021, led to a slightly lower networth over last couple of years, yet minimal reliance on external debt has kept gearing comfortable. While debt protection measures have been affected by losses, healthy capitalization levels have aided the financial risk profile and liquidity.
Long market presence in the industrial bearings segment: The group manufactures customised industrial bearings for numerous industries, but mainly caters to the non-automotive sector. The group has historically derived around 40% of its revenue from exports to the US and Europe. Benefits from track record of over two decades and healthy relationship with customers will continue.
Weaknesses Exposure to volatility in profitability, raw material prices and forex rates, and limited bargaining power with customers: Intense competition limits the ability to pass on any hike in raw material prices to customers, thus constraining profitability. Over the five years ending March 31, 2021, the group’s operating margin has been below 5%. Furthermore, significant exports, in the absence of any hedging policy, exposes the group to fluctuations in forex rates.
Large working capital requirement: Gross current assets were high at 351 days as on March 31, 2021, because of large inventory and stretched receivables of around 7 months and 2 months respectively. |
Liquidity: Adequate Liquidity remains adequate, aided by moderate bank limit utilisation and absence of any term debt. Over the 9 months to October 2021, the company had rarely utilized its working capital limit, despite the large working capital requirement, supported by healthy capitalization level for company’s scale of operations. Current ratio was healthy over 2.5 times as on March 2021. Current freely available cash bank balance of around Rs 2 crore also aids liquidity. |
Outlook: Stable CRISIL Ratings believes the AECL group will continue to benefit from its healthy capital structure and moderate order pipeline. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Group Established in 1985, the AECL group manufactures anti-friction bearings that are used across the power, mining, steel, cement, defence and transportation industries. Manufacturing plants are in Junagadh, Gujarat. |
Key Financial Indicators
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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 - List of Entities Consolidated
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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 | ||
| Facility | Amount (Rs.Crore) | Rating |
| Bank Guarantee | 2.5 | CRISIL A4+ (Rating Reaffirmed and Withdrawn) |
| Cash Credit | 13.9 | CRISIL BB/Stable (Rating Reaffirmed and Withdrawn) |
| Credit Limit Under Gold Card | 1.6 | CRISIL BB/Stable (Rating Reaffirmed and Withdrawn) |
| Proposed Long Term Bank Loan Facility | 4 | CRISIL BB/Stable (Rating Reaffirmed and Withdrawn) |
Criteria Details
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