Rating Rationale
January 17, 2025 | Mumbai
Brady and Morris Engineering Company Limited
Ratings upgraded to 'Crisil BBB-/Stable/Crisil A3'
 
Rating Action
Total Bank Loan Facilities RatedRs.34 Crore
Long Term RatingCrisil BBB-/Stable (Upgraded from 'Crisil BB+/Stable')
Short Term RatingCrisil A3 (Upgraded from 'Crisil A4+')
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 upgraded its ratings on the bank facilities of Brady and Morris Engineering Company Ltd (BMECL) to 'Crisil BBB-/Stable/Crisil A3' from 'Crisil BB+/Stable/Crisil A4+’.

 

The upgrade reflects sustained improvement in BMECL's business profile, driven by healthy growth in Revenue increased by 25% year on year in fiscal 2024 and Rs 44 crore till September 2024, supported by increased demand from its customers. Operating profitability has also improved to 16.57% in fiscal 2024 from 12.28% in fiscal 2023, and is expected to remain at similar level for fiscal 2025, due to better fixed cost absorption. Financial profile remains above average with adequate liquidity marked by adequate cash accrual against repayment and moderate bank limit utilization.

 

The ratings reflect the longstanding experience of the promoters in the material handling equipment industry, the diversified end user industry base of the company and its comfortable financial risk profile. These strengths are partially offset by susceptibility to cyclicality in the end-user industry, volatility in input prices and intense competition, and working capital-intensive operations.

Analytical approach

Crisil Ratings has considered the standalone business and financial risk profiles of BMECL.

Key rating drivers and detailed description

Strengths:

  • Longstanding experience of the promoters: BMECL is a subsidiary of WH Brady and Company Ltd (WHB), which has been involved in the material handling equipment industry since 1895. The Brady group has been controlled by the Mumbai-based Morarka family since 1960. The promoters, thus, have experience of over six decades in the industry. This has given them a healthy understanding of the market dynamics and enabled them to establish relationships with suppliers and customers. Furthermore, the group has been associated with the brand Morris for over a century and has built a strong brand recall. Revenue improved to Rs 75.30 crore in fiscal 2024 from Rs 60.38 crore in fiscal 2023.

 

  • Diversified end-user industry base and established clientele: The company has relationships of more than six decades with its customers and suppliers. It manufactures various material handling equipment for diversified end users, which include steel, oil and gas, cement, minerals and mining, power, chemicals, heavy manufacturing, water and sewage treatment, defence, nuclear energy, ports and metros. Its customers include well-established players such as ACC Ltd, Braj Binani group, Lafarg Cement, Oil and Natural Gas Corporation Ltd, Indian Oil, Bharat Petroleum Corporation Ltd and NTPC Ltd. A diversified end-user industry base allows to overcome the risk of slowdown in an industry and achieve higher growth.

 

  • Comfortable financial risk profile: Capital structure was moderate due to lower reliance on external debt, yielding gearing and total outside liabilities to adjusted networth ratio of 0.33 time and 1.09 times, respectively, as on March 31, 2024. The capital structure is expected to improve over the medium term with healthy accretion to reserves and repayment of preferential shares. Debt protection metrics were healthy due to moderate profitability. Interest coverage and net cash accrual to total debt ratios were 16.88 times and 1.18 times, respectively, in fiscal 2024, and are expected at improve further over the medium term.

 

Weaknesses:

  • Exposure to cyclicality in end-user industries: The company faces competition from large players as well as smaller players. Modest scale of operations limits its ability to benefit from economies of scale, which big players are able to leverage. The scale of operations is expected to improve but should remain modest over the medium term. In addition, performance is closely linked with the investment climate in end-user industries, which are cyclical.

 

  • Susceptibility to volatility in input prices and intense competition: Operating profitability is vulnerable to fluctuation in input prices as competition limits the ability to pass on increase in input cost immediately. Further, intense competition constrains scalability and bargaining power.

 

  • Working capital-intensive operations: Gross current assets were at 155-214 days over the three fiscals through 2024 and stood at 170 days as on March 31, 2024, driven by receivables and inventory of 99 days and 70 days, respectively. Majority of its orders that the company executes are order backed and customized according to the specifications hence, company maintains higher number of components/inventories.

Liquidity: Adequate

Bank limit utilization was moderate at 46.33% in the 12 months through November 2024. Expected cash accrual over Rs 10 crore against nil debt obligation will cushion the liquidity. The company is planning to prepay the preferential shares from its parent, WHB, of around Rs 5 crore by the end of fiscal 2025.The net cash accurals are sufficient against the preferential share repayments. In addition, it will be act as cushion to the liquidity of the company. Current ratio was healthy at 1.92 times as on March 31, 2024.

Outlook: Stable

Crisil Ratings believes BMECL will continue to benefit from the extensive experience of the promoters and their established relationships with clients.

Rating sensitivity factors

Upward factors

  • Substantial Increase in revenue and sustenance of operating margin leading to cash accrual more than Rs 14 crore.
  • Improvement in the working capital cycle

 

Downward factors

  • Net cash accrual below Rs 6 crore on account of decline in revenue or operating profit
  • Further stretch in the working capital cycle or large, debt-funded capital expenditure weakening the liquidity and financial risk profile.

About the company

BMECL was incorporated in 1946 as a majority owned subsidiary of WHB in partnership with the UK-based Morris Material Handling Ltd. WHB holds 72.73% shareholding in BMECL. The company got listed on the Bombay Stock Exchange in 1957. It manufactures material handling equipment, such as chain pulley blocks and various types of cranes and electric hoist blocks, under the brand Morris. It has a total annual capacity of 8,400 pulley blocks and 300 cranes at its facilities in Vatva and Bareja (both in Gujarat). Daily operations are managed by Mr Pavan Morarka.

Key financial indicators

As on / for the period ended March 31

 

2024

2023

Operating income

Rs crore

75.30

60.38

Reported profit after tax (PAT)

Rs crore

8.41

5.05

PAT margin

%

11.17

8.37

Adjusted debt / adjusted networth

Times

0.33

0.95

Interest coverage

Times

16.88

14.56

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs. Crore) Complexity Levels Rating Outstanding with Outlook
NA Bank Guarantee NA NA NA 20.00 NA Crisil A3
NA Bill Discounting under Letter of Credit NA NA NA 1.00 NA Crisil A3
NA Cash Credit NA NA NA 5.00 NA Crisil BBB-/Stable
NA Import Letter of Credit Limit NA NA NA 4.00 NA Crisil A3
NA Letter of Credit NA NA NA 1.50 NA Crisil A3
NA Proposed Long Term Bank Loan Facility NA NA NA 2.50 NA Crisil BBB-/Stable
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 7.5 Crisil BBB-/Stable   --   -- 30-11-23 Crisil BB+/Stable   -- Suspended
Non-Fund Based Facilities ST 26.5 Crisil A3   --   -- 30-11-23 Crisil A4+   -- Suspended
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 20 Union Bank of India Crisil A3
Bill Discounting under Letter of Credit 1 Union Bank of India Crisil A3
Cash Credit 5 Union Bank of India Crisil BBB-/Stable
Import Letter of Credit Limit 4 Union Bank of India Crisil A3
Letter of Credit 1.5 Union Bank of India Crisil A3
Proposed Long Term Bank Loan Facility 2.5 Not Applicable Crisil BBB-/Stable
Criteria Details
Links to related criteria
Rating criteria for manufaturing and service sector companies
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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