Rating Rationale
September 20, 2024 | Mumbai
International Combustion India Limited
Ratings reaffirmed at 'CRISIL BBB/Stable/CRISIL A3+'; Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.120 Crore (Enhanced from Rs.80 Crore)
Long Term RatingCRISIL BBB/Stable (Reaffirmed)
Short Term RatingCRISIL A3+ (Reaffirmed)
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 loan facilities of International Combustion India Ltd (ICIL).

 

The ratings continue to reflect ICIL’s strong track record and the extensive experience of the management in the engineering and capital goods industry, the company’s diversified product profile and end-user industry base, and healthy financial risk profile. These strengths are partially offset by susceptibility to cyclicality in demand and volatility in raw material prices, and large working capital requirement.

Key rating drivers & detailed description

Strengths:

  • Strong track record of operations and established market position: ICIL commenced operations in 1936 as a trading house representing the interests of International Combustion, UK. In 1961, the company started manufacturing activities. It has developed a strong market position with presence of 90 years. Furthermore, the management's industry experience of over three decades, strong understanding of market dynamics and healthy relationships with customers and suppliers will continue to support the business.

 

Optimum capacity utilisation, improved order inflow and growing market position across all segments, including heavy engineering, gear box and building materials, translated into growth in the topline to around Rs 298 crore in fiscal 2024 from Rs 222 crore in fiscal 2023. With lower-than-expected topline of Rs 59.53 crore in the first quarter of fiscal 2025, sustained revenue growth driven by better capacity utilisation will remain monitorable.

 

  • Diversified product profile and end-user industry base: Product portfolio of more than 50 stock-keeping units (SKUs) enables ICIL to mitigate the risk of obsolescence because of any new technology coming into the market. The product profile is further aided by technical tie-ups with reputed global players such as Kuper GmbH, ADEN, Fleximat, Bauer Geared Motors GmbH, and Cementos CAPA, in the industrial machinery, gear box and building material segments.

 

ICIL has longstanding relationships with customers and suppliers, and caters to core industries such as steel, cement, fertiliser, chemical, mining and infrastructure. A diversified end-user industry base allows it to overcome the risk of slowdown in any industry and sustain growth.

 

  • Healthy financial risk profile: The capital structure was healthy owing to low reliance on external funds, as indicated by gearing and total outside liabilities to adjusted networth ratio of 0.26 time and 0.85 time, respectively, as on March 31, 2024. Debt protection metrics were comfortable owing to low leverage and healthy profitability, as reflected in interest coverage and net cash accrual to total debt ratios of 12.61 times and 0.78 time, respectively, in fiscal 2024. Despite additional debt of about Rs 10 crore for ongoing capital expenditure (capex), the capital structure will remain stable over the medium term.

 

Weaknesses:

  • Susceptibility to cyclicality in demand and volatility in raw material prices: The engineering and capital goods industry is cyclical and moves in tandem with end-user industries such as steel, cement, fertiliser, chemical, mining and infrastructure. As raw material cost accounts for 50-60% of operating revenue, profitability is susceptible to volatility in raw material prices. For instance, ICIL’s operating margin rose to 13.2% in fiscal 2024 from 7.6% in fiscal 2023 and was around 8% for the first quarter of fiscal 2025. Sustained improvement in the margin, driven by economies of scale and optimum capacity utilisation, will remain monitorable.

 

  • Large working capital requirement: Gross current assets were at 180-250 days over the three fiscals through 2024, driven by receivables of 80-90 days, retention money and inventory of 60-100 days. A stretched working capital cycle will continue to constrain the operating flexibility.

Liquidity: Adequate

Liquidity has remained adequate, supported by healthy unencumbered cash and bank balance and moderate bank limit utilisation. The working capital facility of Rs 55 crore was utilised 38% on average over the 12 months through July 2024. The utilisation of the non-fund based limit of Rs 70 crore remained around 65% . ICIL had unencumbered mutual fund of around Rs 9 crore as of March 2024. Expected annual net cash accrual of Rs 20-25 crore should sufficiently cover estimated yearly debt obligation of around Rs 2 crore over the medium term.

Outlook: Stable

CRISIL Ratings believes ICIL will continue to benefit from the extensive experience of its promoters and established relationships with clients.

Rating sensitivity factors

Upward factors:

  • Sustenance of operating performance with operating margin above 12%, leading to accrual more than Rs 25 crore
  • Sustenance of the financial risk profile

 

Downward factors:

  • Further stretch in the working capital cycle with GCAs beyond 250 days
  • Large, debt-funded capex weakening the capital structure

About the company

ICIL was incorporated in 1936 in Kolkata. The company manufactures heavy-duty grinding mills, screening and feeding equipment, conveyors, bulk material handling equipment and industrial gear boxes and geared motors, and caters to steel, cement, fertiliser, chemical, mining and infrastructure industries. It also manufactures dry mix mortars in collaboration with Cementos Capa. Its units are in Nagpur, Kolkata, Aurangabad and Ajmer. It is listed on the Bombay Stock Exchange Ltd.

 

The company is managed by Mr Indrajit Sen (managing director).

Key financial indicators

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

297.50

221.95

Reported profit after tax (PAT)

Rs crore

19.95

8.31

PAT margin

%

6.71

3.74

Adjusted debt/adjusted networth

Times

0.26

0.13

Interest coverage

Times

12.61

8.26

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the
instrument		 Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Bank guarantee NA NA NA 70 NA CRISIL A3+
NA Bank guarantee& NA NA NA 5 NA CRISIL A3+
NA Cash credit NA NA NA 45 NA CRISIL BBB/Stable

 & - Fully interchangeable to Cash Credit facility

Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 45.0 CRISIL BBB/Stable   -- 28-09-23 CRISIL BBB/Stable   --   -- --
Non-Fund Based Facilities ST 75.0 CRISIL A3+   -- 28-09-23 CRISIL A3+   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 20 Axis Bank Limited CRISIL A3+
Bank Guarantee 35 UCO Bank CRISIL A3+
Bank Guarantee& 5 HDFC Bank Limited CRISIL A3+
Bank Guarantee 15 ICICI Bank Limited CRISIL A3+
Cash Credit 5 HDFC Bank Limited CRISIL BBB/Stable
Cash Credit 15 UCO Bank CRISIL BBB/Stable
Cash Credit 10 Axis Bank Limited CRISIL BBB/Stable
Cash Credit 15 ICICI Bank Limited CRISIL BBB/Stable
& - Fully interchangeable to Cash Credit facility
Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Approach to Financial Ratios
CRISILs Criteria for rating short term debt

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