Rating Rationale
April 03, 2024 | Mumbai
JNK India Limited
'CRISIL BBB+/Stable' assigned to Corporate Credit Rating
 
Rating Action
Total Bank Loan Facilities RatedRs.150 Crore
Long Term RatingCRISIL BBB+/Stable (Reaffirmed)
Short Term RatingCRISIL A2 (Reaffirmed)
 
Corporate Credit RatingCRISIL BBB+/Stable (Assigned)
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 assigned its CRISIL BBB+/Stable corporate credit rating to JNK India Limited (JIPL; formaly known as JNK India Private Limited) while reaffirming its ratings on the bank loan facilities at CRISIL BBB+/Stable/CRISIL A2.

 

The rating reflects JIPL's established market position and improving scale of operations, well established customer base, and healthy financial risk profile. These strengths are partially offset by its tender-based operations, working capital intensive operations and susceptibility of the operating margin to volatility in raw material prices.

Analytical Approach

For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of JNK India Private Limited (JIPL) and along with its wholly owned subsidiaries, JNK India Private FZE and JNK Renewable Energy Pvt Ltd, together referred to as the JNK group, which is strategically important to, and have a significant degree of operational integration with JIPL.

 

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 and improving scale of operations: The company was incorporated in 2010 and is promoted by Arvind Kamath, and Goutam Rampeli. The promoters have extensive experience in the fire heater industry of over two decade which has given them with strong understanding of the market dynamics. The promoters have developed a technologically strong EPC company. This has further helped the group has further established long standing relationships with all its suppliers and. with the support from JNK Heater Co (Korea) the group has been able to develop strong technical competency which has led to significant increase in the revenues for the group. Revenues have increased to around Rs. 440 crore in fiscal 2024 from Rs. 407 crore in fiscal 2013. Revenues are further expected to increase backed by healthy unexecuted order book of Rs. 761 crore as on 29th February 2024.

 

  • Well established customer base from diversifies end uses industry base:  JIPL has long-standing relationships with its customers and suppliers.  It caters to a diversified end user industry base which includes oil and gas, petrochemical and refining, chemical, fertilizer etc. Its customers include some of the well-established players such as Indian Oil Corporation Limited (IOCL), Numaligarh Refinery Limited, Indian Oil Corporation Ltd, TATA Projects Ltd, Petofac International (UAE) LLC, etc. Further the company has reach in the export market, exposure to which has been growing steadily for the past few fiscals. The company generates majority of its revenues from the export market primarily from Nigeria, Middle East and European countries. A diversified and reputed clientele  allows it, in overcoming the risk of slowdown in a particular industry/customer and maintain its scale.

 

  • Healthy financial profile: The group has a healthy financial profile as reflected in expected networth and moderate TOLANW of around Rs. 169-170 crore and 1.3-1.4 times respectively as on March 31, 2023 and TOLANW is estimated to remain at similar levels as on March 31, 2024. Capital structure has been improving despite high reliance on external debt and creditors to support working capital requirement due to steady accretion to reserves. JIPL debt protection measures have also been at healthy level due to leverage and healthy profitability.  The interest coverage and net cash accrual to total debt (NCATD) ratio are at 7.5-8.5 times and 1.2-1.3 times for fiscal 2024. It is expected to remain stable over the medium term.

 

Weaknesses:

  • Susceptibility of the operating margin to volatility in raw material prices and tender based nature of operations: As entire EPC business is tender based, the improvement in top line and sustenance of profitability will largely be impinged on account of successful bidding and subsequent execution of tenders. Operating margins have historically ranged in between 17-18.6% for the past four fiscals through fiscal 2024. Operating margins are exposed to volatility in its key raw materials price, i.e., steel, however the same is partially mitigated as it forms about 20% of total cost. Overall raw material costs account for 45-55% of operating income and the absence of escalation clauses in contracts with the customers may impact the profitability. Further, sustenance of scale of operations and healthy operating margins will remain a key monitorable.

 

  • Working capital intensive operations: The group’s operations are working capital intensive as reflected by gross current assets of 245 days as on March 31, 2023. This is driven by large debtors and inventory of 119 and 91 days as on March 31, 2023. The group raised bills on a milestone basis and receives payment within 30-60 days of raising bills. However, the debtors are higher due to higher billing done during year end. Inventory primarily is work in progress inventory as depends upon the on-projects. Working capital cycle is expected to remain intensive over the medium term.

Liquidity: Adequate

Bank limit utilization is high at around 93% for the past twelve months ended February 2024. Cash accruals are expected to be over Rs 53-57 crore which are sufficient against term debt obligation of Rs 0.2 crore over the medium term. In addition, it will be act as cushion to the liquidity of the group. Moderate cash and bank balance of around Rs. 47 crores as on March 31, 2023 of which Rs. 15.5 crore is unencumbered. Current ratio is moderate at 1.69 times on March31, 2023. Low gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook: Stable

CRISIL Ratings believe JIPL will continue to benefit from the extensive experience of its promoter, and established relationships with clients.

Rating Sensitivity Factors

Upward factors:

  • Sustained improvement in scale of operation and sustenance of operating margin, leading to higher cash accruals
  • Improvement in working capital management leading to decline in bank limit utilization below 85% on a sustained basis aiding the liquidity profile

 

Downward factors:

  • Decline in scale of operations or decline in operating margins leading to leading to net cash accruals of less than Rs. 35 crores
  • Large debt-funded capital expenditure or substantial increase in its working capital requirements thus weakening its liquidity & financial profile
  • Continued high bank limit utilization above 95% deteriorating the liquidity

About the Company

JIPL was incorporated in 2010 and promoted by Mr. Arvind Kamath and Mr. Gautam Rampelli. It is technologically driven EPC company with key focus on fired heaters, furnaces, hot oil heater, engineering hydrotreaters, reformers and gas crackers, etc. Also provides designing and on-site installation to after sale/ maintenance services. The company has its office located in Thane-Maharashtra.

Key Financial Indicators - Consolidated

As on/for the period ended March 31

Unit

2023

2022

Operating income

Rs.Crore

407.3

296.4

Reported profit after tax

Rs.Crore

46.6

36.0

PAT margins

%

11.44

12.14

Adjusted Debt/Adjusted Networth

Times

0.28

0.08

Interest coverage

Times

14.23

14.27

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 Cash Credit NA NA NA 40 NA CRISIL BBB+/Stable
NA Term Loan NA NA Mar-2027 2.55 NA CRISIL BBB+/Stable
NA Bank Guarantee NA NA NA 107.45 NA CRISIL A2

Annexure - List of Entities Consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

JNK India Private Limited

Full

Common management and operational linkages

 

JNK India Private FZE

Full

JNK Renewable Energy Pvt Ltd

Full

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 42.55 CRISIL BBB+/Stable   -- 06-11-23 CRISIL BBB+/Stable   --   -- --
      --   -- 26-06-23 CRISIL BBB+/Stable   --   -- --
Non-Fund Based Facilities ST 107.45 CRISIL A2   -- 06-11-23 CRISIL A2   --   -- --
      --   -- 26-06-23 CRISIL A2   --   -- --
Corporate Credit Rating LT 0.0 CRISIL BBB+/Stable   --   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 67.45 State Bank of India CRISIL A2
Bank Guarantee 40 HDFC Bank Limited CRISIL A2
Cash Credit 10 HDFC Bank Limited CRISIL BBB+/Stable
Cash Credit 30 State Bank of India CRISIL BBB+/Stable
Term Loan 2.55 State Bank of India CRISIL BBB+/Stable
Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Bank Loan Ratings
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for Consolidation

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Himank Sharma
Director
CRISIL Ratings Limited
D:+91 124 672 2152
himank.sharma@crisil.com


Shalaka Singh
Associate Director
CRISIL Ratings Limited
B:+91 22 3342 3000
Shalaka.Singh@crisil.com


Nishita Kalpesh Vora
Senior Rating Analyst
CRISIL Ratings Limited
B:+91 22 3342 3000
Nishita.Vora@crisil.com
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited, an S&P Global Company)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 

 



About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. 

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK


CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL's privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale ('report') that is provided by CRISIL Ratings Limited ('CRISIL Ratings'). To avoid doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, 'CRISIL Ratings Parties') guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to:
https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.

 

 

CRISIL Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html