Rating Rationale
January 23, 2025 | Mumbai
JNK India Limited
Ratings upgraded to 'Crisil A-/Stable/Crisil A2+'
 
Rating Action
Total Bank Loan Facilities RatedRs.150 Crore
Long Term RatingCrisil A-/Stable (Upgraded from 'Crisil BBB+/Stable')
Short Term RatingCrisil A2+ (Upgraded from 'Crisil A2')
 
Corporate Credit RatingCrisil A-/Stable (Upgraded from 'Crisil BBB+/Stable')
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 upgraded its ratings on the bank facilities and corporate credit Rating of JNK India Limited (JIL, part of JNK group) to 'Crisil A-/Stable/Crisil; A2+' from 'Crisil BBB+/Stable/Crisil A2'.

The upgrade reflects overall improvement in the credit risk profile of the group driven by steady growth in scale of operations and improved liquidity profile. With the IPO proceeds (completed during fiscal 2025) being utilised towards working capital requirement, the group’s reliance on external debt and creditors to support working capital cycle has significantly reduced on a sustained basis. Financial risk profile has further strengthened with strong networth and reduced dependence on external borrowings. Further the bank limit utilization has also been reduced and is currently is at an average of 47% on an average for the past 6 months through December 2024 which combined with healthy cash accruals against minimal repayment obligations provides ample liquidity cushion. Business risk profile has also been improving with continuous increase in scale of operations and healthy operating margins. Revenues have been healthy at Rs. 480 crore in fiscal 2024 and is further expected to increase to more than Rs. 600 crore in fiscal 2025 driven by a healthy orderbook of Rs. 1312 crore as on 30th September 2024. Operating margins are expected to sustain around 17-18% over medium the term backed by timely execution of expected orderbook.


The rating reflects JIL's established market position and improving scale of operations, well established customer base, and strong financial risk profile. These strengths are partially offset by its tender-based operations, and working capital intensive operations.

Analytical Approach

For arriving at the ratings, Crisil Ratings has combined the business and financial risk profiles of JNK India Private Limited (JIL) 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 JIL.

 

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 strong orderbook providing revenue visibility:  The company was incorporated in 2010 and is promoted by Arvind Kamath, and Goutam Rampelli. 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 establish 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. 480 crore in fiscal 2024 from Rs. 407 crore in fiscal 2023. Revenues are further expected to increase with revenues of Rs 192 crores in first half of fiscal 2025 supporting a growth of 25-30% growth in current fiscal. The scale of operations are expected to sustain over the medium term backed by healthy order book of Rs. 1312 crore as on 30th September 2024 providing adequate revenue visibility.

 

  • Well-established customer base from diversified end user industry:  JIL 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 group has well established its reach in the export market, exposure to which has been growing steadily for the past few fiscals to 18% in fiscal 2024. 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.

 

  • Strong financial risk profile: The financial risk profile is supported by strong networth of around Rs. 499 crore as on 30th Sept 2024 as compared to Rs. 195 crore as on 31st March 2024 and healthy capital structure. With reduced reliance on external debt and creditors to support working capital cycle, which along with increase in networth has led to improvement in the capital structure with total outside liabilities to adjusted networth of around 0.6 times as on 30th September 2024 and our expectations that it will sustain below 1 times over the medium term as compared to 1.7 times as on 31st March 2024. Debt protection metrics are healthy marked by interest coverage of 4.5 times for H1 FY25 and are further expected to improve with improvement in the operating margins over the medium term.

 

Weaknesses:

  • Susceptibility of the operating margin to tender based nature of operations: As entire EPC business is tender based, the improvement in top line and sustenance of profitability will largely be impeded on account of successful bidding and subsequent execution of tenders. The operating margins have historically ranged between 17-21.2% for the past four fiscals through fiscal 2024. The volatility is due to varied margins during the various stages of project execution. While the margins were affected in H1FY25 due to majority projects being in mid stage, the same is expected to improve in H2FY25 with commencement t of new projects as well as previous projects reaching the final stage. Sustenance of operating margins will continue to remain a key monitorable over the medium term.

 

  • Working capital intensive operations: Operations are working capital intensive as reflected by gross current assets (GCA) of 331 days as on March 31, 2024 and is expected to remain high over the medium term. This is driven by large debtors and inventory of 162 and 147 days as on March 31, 2024. The company 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 ongoing  projects. Further gross current assets also include retention money and security deposits to be provided by the group which is expected to continue given the nature of the business. The working capital cycle is expected to remain intensive over the medium term.

Liquidity: Strong

Bank limit utilization has reduced with IPO proceeds being utilised to fund working capital requirements and is at an average of 47%over the past 6 months through December 2024 as compared to high utilisation of around 93% last year. Cash accruals are expected to be over Rs 70-80 crore which are sufficient against term debt obligation of Rs 0.2 crore over the medium term. In addition, it will act as cushion to the liquidity of the group. High cash and bank balance of around Rs. 216 crores as on Sept 30th 2024 of which around Rs. 70-80 crore is unencumbered. Current ratio is moderate at 1.5 times on March31, 2024. 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 JIL will continue to benefit from the extensive experience of its promoters, and established relationships with clients.

Rating sensitivity factors

Upward factors:

  • Higher than expected increase in scale of operation or sustenance of operating margin above 18%, leading to higher than expected cash accruals
  • Sustenance of financial risk profile

 

Downward factors:

  • Decline in scale of operations or decline in operating margins leading to leading to net cash accruals of less than Rs. 40 crores
  • Stretch in its working capital requirements thus weakening its liquidity or financial profile

About the Company

JIL was incorporated in 2010 and promoted by Mr. Arvind Kamath and Mr. Goutam Rampelli. It is technologically driven EPC company with key focus on fired heaters, furnaces, hot oil heater, , 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

As on/for the period ended March 31

Unit

2024

2023

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 Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs.Crore) Complexity Levels Rating Outstanding with Outlook
NA Bank Guarantee NA NA NA 107.45 NA Crisil A2+
NA Cash Credit NA NA NA 40.00 NA Crisil A-/Stable
NA Term Loan NA NA 31-Mar-27 2.55 NA Crisil A-/Stable

Annexure - List of Entities Consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

JNK India Limited

Full

Parent company

JNK India Private FZE

Full

100% subsidiary

JNK Renewable Energy Private Limited

Full

100% subsidiary
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 42.55 Crisil A-/Stable   -- 03-04-24 Crisil BBB+/Stable 06-11-23 Crisil BBB+/Stable   -- --
      --   --   -- 26-06-23 Crisil BBB+/Stable   -- --
Non-Fund Based Facilities ST 107.45 Crisil A2+   -- 03-04-24 Crisil A2 06-11-23 Crisil A2   -- --
      --   --   -- 26-06-23 Crisil A2   -- --
Corporate Credit Rating LT 0.0 Crisil A-/Stable   -- 03-04-24 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 40 HDFC Bank Limited Crisil A2+
Bank Guarantee 67.45 State Bank of India Crisil A2+
Cash Credit 10 HDFC Bank Limited Crisil A-/Stable
Cash Credit 30 State Bank of India Crisil A-/Stable
Term Loan 2.55 State Bank of India Crisil A-/Stable
Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for Consolidation

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