| ITL Industries 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 'CRISIL BBB/Stable/CRISIL A3+' ratings on the bank facilities of ITL Industries Ltd (ITLIL).
The ratings continue to reflect extensive experience of the promoters in the engineering industry and the stable market position and comfortable financial risk profile of ITLIL. These strengths are partially offset by susceptibility to volatility in commodity prices and large working capital requirement. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters: Mr Rajendra Singh Jain and Mr Mahendra Singh Jain, the joint managing directors and promoters of the company, handle the day-to-day business; they have experience of over two decades in the industry. The promoters, along with the board of directors and the senior management, have rich experience in the engineering industry and have been instrumental in shaping the company's business risk profile.
Stable market position: The company's three-decade-long presence in the industry has led to healthy relationships with customers across various industries, such as general engineering, auto components, forging, power and metals. Concentration risk is minimal as customers are located across India, and the top five clients contribute to less than 10% of overall revenue. The company has its own research and development centre, which develops new products and improves existing ones. Supported by the quality of products, the company has been receiving repeat orders from its customers. Operating income stood at Rs 113.51 crore in fiscal 2022, a 27% year-on-year growth. The company has achieved revenue of Rs 69.25 crore in the first half of the ongoing fiscal and has orders of over Rs 38 crore to be executed over the next 2-3 months, which provides near-term revenue visibility.
Comfortable financial risk profile: The financial risk profile is supported by a healthy capital structure, as reflected in gearing of 0.25 time and networth of Rs 53.52 crore as on March 31, 2022. Debt protection metrics were comfortable, indicated by interest coverage and net cash accrual to adjusted debt ratios of 8.71 times and 0.51 time, respectively, in fiscal 2022.
Weakness: Susceptibility of the operating margin to volatility in commodity prices: Raw material costs account for 65-72% of the operating revenue. Any sharp deviation in raw material prices is likely to impact the operating margin of the company. Operating margin of 7.53% in fiscal 22 as compared to 9.94% in FY 21 the reduction in margins is due to increase in material costs in this fiscal and due to increase in logistic surcharge.
Moderate scale of operations: ITLIL scale of operations is moderate with an operating income of Rs.105.17 crore in fiscal 2022, scale remains still moderate makes the ITLIL susceptible to intense competition from various players in the industry, which impacts pricing flexibility. The order execution in FY 2023 and its impact on the revenue and profitability profile of the company will be a key monitorable. Large working capital requirements: Operations are working capital intensive, as reflected in gross current assets of 213 days as on March 31, 2022, driven by inventory and receivables of 132 and 69 days, respectively. To ensure smooth execution of orders, the company maintains inventory of 90-120 days because of the high lead time of raw materials. It sells its products against advances and open credit of 60-120 days, against which it receives credit of 60-90 days from dealers and distributors. |
Liquidity : Adequate Net cash accrual, expected at Rs 7.8-9.0 crore per annum, will sufficiently cover yearly debt obligation of Rs 1-1.5 crore over the medium term. Fund-based limit of Rs 14 crore was utilised at 73% on average over the 12 months through September 2022. Cash and bank balance stood at Rs 1.45 crore and current ratio at 1.86 times as on March 31, 2022. |
Outlook Stable CRISIL Ratings believe ITLIL will continue to benefit from the extensive experience of its promoter, and established relationships with clients. |
Rating Sensitivity factors Upward factor
Downward factors
|
About the Company ITLIL, incorporated in 1989 at Indore, Madhya Pradesh. ITLIL is engaged in manufacturing of band saw and circular saw machinery (used in metal cutting), blade for band saw and circular saw, and pipe and tube manufacturing. ITL is also an authorized distributor for Eaton hydraulic systems and Siemens India. |
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 |
| Bank Guarantee | 2.5 | State Bank of India | CRISIL A3+ |
| Cash Credit | 14 | State Bank of India | CRISIL BBB/Stable |
| Letter of Credit | 3 | State Bank of India | CRISIL A3+ |
| SME Care Loan | 0.21 | State Bank of India | CRISIL BBB/Stable |
| Standby Line of Credit | 2 | State Bank of India | CRISIL BBB/Stable |
| Term Loan | 1 | State Bank of India | CRISIL BBB/Stable |
| Working Capital Term Loan | 1.64 | State Bank of India | CRISIL BBB/Stable |
This Annexure has been updated on 11-Feb-23 in line with the lender-wise facility details as on 24-Jan-23 received from the rated entity.
Criteria Details
|