| Hamilton Housewares Private Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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 and commercial paper of Hamilton Housewares Private Limited (HHPL) at 'CRISIL AA-/Positive/CRISIL A1+'.
The ratings reflect the company’s strong market position backed by well-known brands in the household plastic-ware, thermo-ware and glassware product segments, diversified and expanding product portfolio, increasing geographic diversity and scale of business. Consistent investments made by the company in augmenting its manufacturing capacities and focus on expanding its product lines is expected to further improve the business risk profile over the medium term.
Operating performance has shown a significant improvement in fiscal 2022 with revenue growth of 29% to Rs 1864 crore (FY21: Rs 1454 crore) supported by demand recovery across all product segments. Further, company is also foraying into newer product segments like kitchen ware and appliances which coupled with demand returning in the water bottle and tiffin segment (post re-opening of schools and colleges) is expected to drive revenue growth to around 25% next fiscal. During the first quarter of fiscal 2023, HHPL has already generated revenues of ~Rs 500 crore.
Operating margins in fiscal 2023 moderated to 15.3% (FY21: 16.5%) primarily due to increase in raw material prices and low capacity utilization in its new plant at Sri City (thermo-steel plant aimed at import substitution). Around 40-45% of the company’s raw material is linked to crude prices which recorded a sharp increase during the fiscal impacting gross margins by ~500 bps. However, better operating leverage ensured overall impact on operating margins were restricted to 120 bps. Subsequent price hikes undertaken coupled with increased capacity utilization at Sri City plant (import substitution of thermo-steel products) is expected to drive operating margins to over 17% this fiscal (16.3% operating margin recorded during Q1 of Fiscal 2023).
Company’s financial risk profile continues to remain strong driven by healthy networth of Rs 1086 crore and low debt of Rs. 76 crore. Networth is expected to further strengthen with expected accruals of over Rs 300 crore per annum over the medium term. Debt protection metrics are expected to remain healthy with interest coverage expected at over 30 times and Net Cash Accruals to Total Debt (NCATD) expected at over 3 times over the medium term. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has considered standalone credit profile of HHPL. HHPL has provided corporate guarantee for the bank loans (Rs 12 crore as on March 31, 2022) of Hamilton Writing Instruments Pvt Ltd (HWIPL), which has been factored as part of adjusted debt of HHPL. Team does not consolidate HWIPL given it is operated independently and is in a different line of business and any support is likely to come directly from the promoters. The guarantee has been given by HHPL for the comfort of the banks. |
Key Rating Drivers & Detailed Description Strengths:
Overall, revenue is expected to grow at around 25% in fiscal 2023, supported by continued introduction of new products, increasing sales force, entry into new geographies and higher reach through e-commerce channels.
HHPL also follows a calibrated approach for entering into newer product segments. Before entering any product segment, it first tests the market through importing the products and selling it domestically under Hamilton’s brand. If the product finds enough demand, HHPL proceeds to setup manufacturing capacities for the same. HHPL has been entering new segments successfully using this approach.
Weaknesses:
|
Liquidity: Strong HHPL enjoys strong liquidity driven by expected cash accruals of over Rs. 300 crore per annum over the medium term. HHPL also has access to fund based limits of Rs 150 crore, utilized to the tune of 12% on an average over the 12 months ended June 2022. Cash accruals should be largely sufficient to fund capex requirements, moderate repayment obligations and incremental working capital requirements. With low leverage, HHPL has sufficient gearing headroom, to raise additional debt if required. |
Outlook: Positive CRISIL Ratings believes the Hamilton Housewares will continue to benefit over the medium term from favourable demand for houseware, and its strong market position in the organized plasticware, thermoware, and glassware segments. The company is also expected to improve its already healthy financial risk profile, supported by improving scale of operations and maintenance of healthy margins. |
Rating Sensitivity factors Upward factors
Downward factors
|
About the Company HHPL sells plasticware, thermoware, and melamineware under the Milton brand, glassware under Treo brand and kitchenware under Milton Procook brand. It also sells household cleaning articles under the SpotZero brand. It was set up as a proprietorship firm named DG Glass in 2000 by Mr. Ajay Vaghani, and was reconstituted as a private limited company with the current name in 2003. It is one of the largest players in the household plasticware and glassware segment in India. It has production units at Silvassa (Dadra and Nagar Haveli), Guwahati (Assam) and at Haridwar (Uttarakhand). |
Key Financial Indicators
|
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
| 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 |
| Cash Credit | 30 | HDFC Bank Limited | CRISIL AA-/Positive |
| Cash Credit | 40 | ICICI Bank Limited | CRISIL AA-/Positive |
| Cash Credit | 2.5 | IndusInd Bank Limited | CRISIL AA-/Positive |
| Cash Credit | 40 | State Bank of India | CRISIL AA-/Positive |
| Cash Credit | 7.4 | YES Bank Limited | CRISIL AA-/Positive |
| Letter of Credit | 25 | HDFC Bank Limited | CRISIL A1+ |
| Letter of Credit | 20 | ICICI Bank Limited | CRISIL A1+ |
| Letter of Credit | 22.5 | IndusInd Bank Limited | CRISIL A1+ |
| Letter of Credit | 40 | State Bank of India | CRISIL A1+ |
| Letter of Credit | 22.6 | YES Bank Limited | CRISIL A1+ |
| Proposed Long Term Bank Loan Facility | 90 | Not Applicable | CRISIL AA-/Positive |
This Annexure has been updated on 24-Mar-2023 in line with the lender-wise facility details as on 20-Mar-2023 received from the rated entity.
Criteria Details
|