| Bharat Gears Limited | ||||||
| Rating outlook revised to 'Negative'; Ratings Reaffirmed | ||||||
| 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 revised its outlook on the long-term bank facilities of Bharat Gears Limited (BGL) to ‘Negative’ from ‘Stable’ while reaffirming the rating at ‘Crisil BBB-’. Short-term rating has been reaffirmed at ‘Crisil A3’.
Rating action reflects continued moderation in the business risk profile of the company on account of subdued demand and lower fixed cost absorption.
Revenue for the 9MFY25 moderated to around Rs 472 crore, a year-on-year degrowth of ~4% mainly due to slower-than-expected recovery owing to subdued demand. The company has reported revenue of Rs 472 crore and operating profitability of Rs 12.70 crore in 9M FY25 while revenue was at Rs.492 Crores and operating profitability of Rs.16.24 Crores during similar period of FY 24. This plummeting margin is also on account of low-capacity utilization resulting in lower absorption of fixed cost amid tepid demand from the end user segment.
Though, company’s performance has seen improvement in Q2FY25 (Revenue of Rs.164.5 Crores and operating profit of Rs.7.73 Crores), the company has incurred operating losses in Q3FY25.
During Q2 FY25, company has sold a part of land situated at Mumbra plant and has accounted exceptional gains of Rs.16.84 Crores. Despite the weakened operating performance, financial risk profile is likely to remain adequate with the expected revival of demand. Debt protection metrics, which is expected to be impacted this fiscal, will gradually improve from next fiscal and will remain monitorable.
The company is expected to use proceeds of monetized land for early principal repayment which will support the liquidity profile.
The ratings continue to reflect the extensive experience of the promoters in the auto components industry, established relationships with key customers, and partially integrated operations. These strengths are offset by exposure to exposure to cyclicity in the auto industry and leveraged capital structure |
Analytical Approach Crisil Ratings has evaluated the standalone business and financial risk profiles of BGL |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
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Liquidity: Adequate Net cash accruals (NCA) are expected to be over Rs 24 crore per fiscal adequate to meet term loan repayment of Rs 18-20 crore per fiscal over the medium term and capex requirements expected at Rs 2-3 crore per annum over the medium term. Cushion between NCA and repayment obligations is sensitive to improvement in operating margin which will remain key monitorable over medium term. Bank limit utilization was 68% (fund-based limit of Rs 45 crore) as on 31st Dec 2024. |
Outlook: Negative BGL’s credit profile will remain under pressure on account of subdued operating performance with fall in operating margin. |
Rating sensitivity factors Upward factors:
Downward factors:
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About the Company Established in 1971, BGL manufactures a range of gears for tractors, commercial vehicles, buses, and utility vehicles. Products include hypoid and spiral gears, differential gears and shafts, complete automotive transmissions, gearbox sub-assemblies, and differential assemblies. Established in 1971, BGL manufactures a range of gears for tractors, commercial vehicles, buses, and utility vehicles. Products include hypoid and spiral gears, differential gears and shafts, complete automotive transmissions, gearbox sub-assemblies, and differential assemblies. |
About the Group Established in 1971, BGL manufactures a range of gears for tractors, commercial vehicles, buses, and utility vehicles. Products include hypoid and spiral gears, differential gears and shafts, complete automotive transmissions, gearbox sub-assemblies, and differential assemblies. |
Key Financial Indicators
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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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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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