| Butterfly Gandhimathi Appliances Limited | ||||||
| Long term rating continues on 'Watch Positive'; Short term rating 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 continued its rating on the long-term bank facilities of Butterfly Gandhimathi Appliances Limited (BGAL) on ‘Rating Watch with Positive implications’, while reaffirming the short term rating at ‘CRISIL A1’+.
CRISIL Ratings had placed its ratings on ‘watch with positive implications' on April 4, 2023 following the announcement dated March 25, 2023 by Crompton Greaves Consumer Electricals Limited (CGCEL; rated CRISIL AA+/Stable/CRISIL A1+) regarding the approval of the board in respect of scheme of amalgamation of the BGAL (Subsidiary) with CGCEL. This is subject to necessary statutory and regulatory approvals from stock exchanges, National Company Law Tribunal, minority shareholders, lenders, and creditors and other operational activities pertaining to merger.
The company has received approvals from stock exchanges and further approvals from other regulatory authorities are currently awaited.
The objective of this merger is to accelerate and smoothen the realisation of synergies of the combined business, simplify the corporate and governance structure and alignment of interest for shareholders of both companies with benefits to all stakeholders.
The ratings reflect BGAL's established brand and diversified product profile, along with its strong financial risk profile. The ratings also factor in strong managerial and operational support expected from its parent. These strengths are partially offset by intense competition in the cookware/kitchen appliance industry and susceptibility of operating profitability to volatility in raw material prices. |
Analytical Approach CRISIL Ratings has analysed the standalone business risk and financial risk of BGAL. CRISIL Ratings has also applied parent notch-up framework to factor in support for BGAL from CGCEL as the company will enjoy operational, financial, and managerial support from CGCEL. |
Key Rating Drivers & Detailed Description Strengths: Strong operational and financial support from parent: CGCEL holds majority stake in BGAL and is expected to extend strong operational and managerial support. CGCEL has now announced merger of BGAL in CGCEL. BGAL is deriving and will derive implicit benefits being a subsidiary/part of CGCEL and its association with the Crompton brand.
Established brand, and diversified product profile: The company sells liquefied petroleum gas (LPG) stoves, pressure cookers, mixer grinders, and vacuum flasks under the Butterfly brand, which has been highly popular in India for over 20 years. Business is catered to retail and institutional segments. BGAL also generates significant revenue through ecommerce platforms and other online mediums owing to healthy brand recognition in the kitchen appliance segment.
Strong financial risk profile: The financial risk profile is strong marked by nil debt and net worth of around Rs.256 crore as on March 30, 2023. Further, apart from regular replacement capex largely to be funded through internal accruals, there are no major debt funded capex plans over the medium term. This along with consistent accretion to reserves is expected to further strengthen the capital structure.
Debt protection metrics continues to remain strong with interest coverage and Total outside Liabilities to Total Networth (NCATD) of above 15 times and below 1 times respectively for the medium term.
Weaknesses: Intense competition in the cookware/kitchen appliance industry: The branded kitchen appliance industry is highly competitive, marked by players such as TTK Prestige Ltd (TTK; CRISIL AA/Stable/CRISIL A1+), Hawkins Cookers Ltd, Maharaja Appliances Ltd, and Panasonic India Pvt Ltd. Some competitors, such as TTK, have pan-India presence, and have established brand recall across product categories. Intense competition is likely to constrain business risk profile over the medium term.
Susceptibility of operating margin to volatility in raw material prices: Operating margin is susceptible to volatility in prices of steel and aluminium, which form one of the key input materials. Any sharp movement in their prices could impinge on the overall margin. |
Liquidity: Strong Liquidity is supported by healthy cash accrual, low utilization of bank limits, and cash and cash equivalents of Rs 62 crores as on March 31, 2023. Expected cash accrual of above Rs 60-70 against nil repayment obligations over the medium term. Regular capex is expected to be moderate and to be funded through internal cash accrual. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company BGAL is the flagship company of the Butterfly group. It manufactures traditional kitchen appliances under the Butterfly brand. The company is listed on National Stock Exchange and BSE Ltd. The company has been acquired by CGCEL in fiscal 2022.
The company has achieved revenue of Rs 219 crore with margins of ~9% in Q1 fiscal 2024. |
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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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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