| Centum Electronics Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB- / Stable / CRISIL A3 ' | ||||||
| Rating Action | ||||||
| ||||||
| 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 ratings on the bank facilities of Centum Electronics Limited (CEL; part of the centum group) at ‘CRISIL BBB-/Stable/CRISIL A3’.
The ratings continue to reflect established market position, aided by the extensive experience of the promoter and its moderate debt protection metrics. These strengths are partially offset by susceptibility to risks related to technology changes, modest financial risk profile and working capital intensive operations. |
Analytical Approach CRISIL Ratings has, combined the business and financial risk profiles of CEL and its subsidiaries. This is because the entities, collectively referred to as the Centum group, have operational and financial linkages, and are controlled and managed by the same promoter.
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: Established market position, aided by the extensive experience of the promoter: The promoter's experience of over two decades has helped establish healthy relationships with customers. Products being used in critical areas, such as space and defence, bear testimony to the technical capability of the group. Order book is healthy at around Rs.1300 crore as on September 16, 2022 supporting revenue visibility over the medium term.
Comfortable debt protection metrics: Moderate profitability has led to comfortable debt protection metrics marked by interest coverage and NCATD (net cash accruals to debt) of 2.89 times and 11% respectively in FY22. Also, in the backdrop of capex done towards improving profitability, debt protection metrics is expected to remain comfortable over the medium term. Net worth and gearing continues to remain moderate at around Rs.107 crore 2.53 times respectively in FY22.
Weaknesses: Susceptibility to risks related to technology changes: Any change in technology will require realignment of products in line with the end-user technology. Delays in such adjustments could weaken the group's competitive position.
Modest financial risk profile: Total outside liabilities to tangible net worth (TOL/TNW) continues to remain high at 6.7 times in FY 2022. High dependency on credit received from suppliers and customer advances along with increased working capital borrowings has led to modest TOL/TNW. However, with the expectation of healthy accretion to reserves and no major debt funded capex plans over the medium term, the same is expected to improve going forward.
Working capital-intensive operations: Working capital intensity remains high: gross current assets were sizeable at 272 days as on March 31, 2022—driven by inventory and debtors of 156 days and 99 days, respectively. The same is expected to improve gradually over the medium term. |
Liquidity: Adequate Average month end bank limit utilization over the last 12 months ended June 2022 has remained modest at less than 70%. Cash accrual in excess of Rs.45 crore is expected to be generated over the medium term that shall be adequate to meet repayment obligations of less than Rs.35 crore. The company had an extraordinary expense of around Rs.60.35 crore in FY22. Around Rs.43.68 crore out of this was factored during the first quarter of fiscal 2022 on account of write off of funds receivable from the sale of a division of its subsidiary however, since this is noncash in nature it has not impacted working capital requirements adversely. Further, Rs.16.66 crore towards onetime settlement of claims and bills of this division was incurred during last quarter FY22. CEL maintains around Rs.10 crore of unencumbered cash in its accounts that provides additional support to liquidity. |
Outlook Stable CRISIL Ratings believes that CEL shall continue to benefit from its established market position over the medium term |
Rating Sensitivity factors Upward Factors
Downward Factors
|
About the Group Set up by Mr Apparao Mallavarapu, a first-generation entrepreneur, in 1993, CEL manufactures modules and sub-systems used in the aerospace, defence, and industrial electronic sectors. CAG manufactures products for the rail transportation market, focusing on improving energy efficiency, security, and real-time information access |
Key Financial Indicators
|
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
Annexure – List of entities consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Bank Guarantee | 20 | YES Bank Limited | CRISIL A3 |
| Cash Credit | 41 | State Bank of India | CRISIL BBB-/Stable |
| Cash Credit & Working Capital Demand Loan | 40 | HDFC Bank Limited | CRISIL BBB-/Stable |
| Cash Credit & Working Capital Demand Loan | 62.7 | Kotak Mahindra Bank Limited | CRISIL BBB-/Stable |
| Export Packing Credit | 25 | Citibank N. A. | CRISIL BBB-/Stable |
| Letter of credit & Bank Guarantee | 177 | State Bank of India | CRISIL A3 |
| Proposed Working Capital Facility | 34 | Not Applicable | CRISIL BBB-/Stable |
This Annexure has been updated on 20-Feb-23 in line with the lender-wise facility details as on 03-Feb-23 received from the rated entity.
Criteria Details
|