| Emkay Taps and Cutting Tools Limited | ||||||
| Ratings continues on 'Watch Developing' | ||||||
| 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 continues its ratings on the bank facilities of Emkay Taps and Cutting Tools Limited (ETCTL) on ‘Rating Watch with Developing Implications’.
CRISIL Ratings placed the rating on watch on July 06, 2023 following the update given by the management on the proposed demerger of ETCTL’s manufacturing of threading taps and cutting tools business (Demerged Company) into Emkay Tools Limited (ETL, Resulting Company). National Company Law Tribunal, Mumbai has approved the scheme, and the scheme has become effective from the appointed date of April 01, 2024. As per the scheme of arrangement the shareholders of the demerged company will be issued equity shares of the resulting company in the ratio of 1:1. The company is in the process of issuing shares and subsequent listing of ETL and finalization of financials for both the companies as on appointment date. CRISIL Ratings will resolve the watch on completion of the entire process and clarity on credit profile of ETCTL.
The rating continues to reflect established market position and the expected company’s strong financial risk profile in absence of any major debt. The strength is partially offset by moderate scale of operations. |
Analytical Approach CRISIL Ratings has evaluated the standalone business and financial risk profiles of ETCTL. |
Key Rating Drivers & Detailed Description Strengths: Strong financial risk profile: Financial risk profile is strong marked by robust net worth at around Rs.298 crores (pre demerger) as on March 31, 2024, and low total outside liabilities to adjusted net worth of around 0.02 times as on March 31, 2024. This strength is on account of lower reliance on working capital debt and significant liquid investment. Debt protection metrics are comfortably marked by interest coverage over 100 times for fiscal 2024. The financial and debt risk profile is expected to remain strong even after transfer of manufacturing business to ETL supported by minuscule debt and continuation of healthy liquid investments.
Weakness: Moderate scale of operations: Bulk of the revenue accrues from the automobile and auto-ancillary industry operations under which are now shifted to ETL. Windmill business would continue under ETCTL where revenue is minimal at around Rs.2 crores. Strategy of management and business plan over medium term remains monitorable. |
Liquidity: Strong Liquidity is strongly marked by nil term loan obligation. Bank Limit utilization remains below 20% on average. The company has investments of around Rs.254 crore as of March 30, 2024 supporting overall liquidity. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Company ETCTL was set up in 1976, as a proprietorship firm of Mr Ajay Prakash Kanoria, a Nagpur-based first-generation entrepreneur. The firm was reconstituted as a private limited company in 1995, and a public limited company in 2015. It is listed on NSE-Emerge. It is into manufacturing of high-speed steel (HSS) threading taps and cutting tools, mainly for the automobile and auto ancillary industries. It also owns and operates wind-mills in Rajasthan (2 windmills with capacity of 0.8 MW each) and Karnataka (1.2 MW).
Management approved the scheme of arrangement in June-23 post which company has received approval from NCLT of scheme of arrangement of Emkay Taps and Cutting Tools Limited (ETCTL, the demerged company) and Emkay Tools Limited (ETL, resulting company ) has become effective in November-24. As per scheme of arrangement manufacturing business is transferred to ETL.
As per agreement there is no change in the shareholding pattern of the demerged company and the shareholders of the demerged company shall, subject to applicable law, be issued equity shares of the Resulting Company in the ratio of 1:1. The management is in process of listing shares of ETL in NSE Emerge SME platform. |
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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