| Bharat Dynamics Limited | ||||
| Rating reaffirmed at 'CRISIL A1+' | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL A1+' rating on the short-term bank facilities of Bharat Dynamics Ltd (BDL).
The rating continues to reflect BDL's strategic importance to the Government of India (GoI), being the prime guided weapons production agency in the country. The rating also factors in an established market position in the guided weapon systems segment, satisfactory order pipeline, and a strong capital structure marked by strong net-worth and nil debt. These strengths are partially offset by large working capital requirement and susceptibility to time and cost overruns in order execution.
BLD revenue declined by 5% on year in fiscal 2024 to Rs 2369 crore due to slower than anticipated order execution due to delay in receipt of certain components from foreign original equipment manufacturers. Orderbook as on March 31, 2024 remained healthy at Rs 19434 crore providing sufficient revenue visibility for the medium term. Operating profit however grew by 37% on year and operating profit margin improved by 770 bps (basis points) to 25% in fiscal 2024 due to improvement in gross margins due to healthy product mix and lower expenditure on research and expenditure.
Revenue in the near term is expected to grow by 28%-30% in fiscal 2025 and 13-15% on year in the medium term led by stable order execution rate and healthy order book addition expected which stood at Rs 19434 crore as on Mar-2024. BDL has been focusing on indigenization of components and reducing its dependence on imports. Operating margins on the other hand, are expected to moderate and remain range bound between 17-18% in the near to medium term, on the back of normalization of product mix and ramp up expected in R&D spends.
Financial risk profile of the company remained strong with nil debt as on March 31, 2024 and strong capital structure. BDL manages most of the incremental working capital requirement through internal accruals with minimum utilization of its fund-based limits. Customer advances from Government of India (GoI) through ministry of defense (MoD) which ranges between 15-20% of the order also helps managing the incremental working capital requirement for the company. Leverage ratio marked by total outside liability to tangible net-worth (TOLANW) stood at 1.87 times in fiscal 2024 mostly on the account of higher payables. BDL is expected to remain debt free in the medium term with the incremental working capital requirements mostly managed through internal accrual and existing cash and equivalents.
Liquidity in the company remained strong with cash and equivalents of ~Rs 3600 crore as on June 30, 2024. BDL has capital expenditure plans of Rs 180-200 crore in fiscal 2025 and Rs 100-120 crore there after. Internal accruals of above Rs 450 crore per annum will be sufficient for the annual capex plans. |
Analytical Approach CRISIL Ratings has applied the criteria for notching up standalone ratings of entities based on Government Support. BDL will, in case of exigencies, received support from Government of India (“GoI”) considering its strategic importance to the Government. GoI has majority ownership (74.93%) in BDL. In addition, the team has considered standalone business and financial risk profiles of BDL, as the company does not have any subsidiaries. |
Key Rating Drivers & Detailed Description Strengths:
BDL has a well-developed vendor network and provides continuous assistance to its vendors in tool development, fixture building and related technologies. Consequently, it has indigenised ~90% of major missiles. BDL's established market position and ability to achieve high indigenisation has led to consistent order flow.
Weaknesses:
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Liquidity: Strong Expected cash accruals of above Rs. 450 crore per annum over fiscal 2025 to 2027 and unencumbered cash and cash equivalent of around Rs. 3,600 crore as on June 30, 2024, will sufficiently cover incremental working capital requirements and capex of Rs. 100-200 crore per annum during the same period. Further, GoI will provide need-based support, considering BDL is the primary agency to produce guided missiles for the armed forces. |
Rating sensitivity factors Downward factors:
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About the Company BDL was set up in Hyderabad in 1970 as a central public sector enterprise. The company is the prime production agency for guided weapon systems for the Indian defence forces. BDL also manufactures underwater weapon systems, surface-to-air missiles and associated equipment. Furthermore, it is into refurbishment of vintage defence equipment for the Indian army. BDL has three manufacturing facilities, one in Visakhapatnam (Andhra Pradesh) and two in Telangana(1). The company is setting up three more facilities, one each in Amravati (Maharashtra), Jhansi (Uttar Pradesh) and Ibrahimpatnam (Telangana).
(1)Facilities are in Rangareddy district and Bhanur in Medak district |
Key Financial Indicators - CRISIL Ratings adjusted numbers
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
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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Criteria Details
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