CRISIL Ratings has assigned its ‘CRISIL AA-/Stable’ rating to the long-term bank facilities of Jupiter Wagons Limited (JWL). CRISIL Ratings has also assigned its ‘CRISIL A1+’ rating to the company’s short-term bank facilities and commercial paper. 

 

The ratings reflect the established market position supported by technology tie-ups and partnerships, improving scale of operations, continuous backward integration, healthy order book providing revenue visibility and robust financial risk profile. These strengths are partially offset by exposure to risks relating to fluctuation in raw material prices, intense competition and working capital intensive operations.

Analytical Approach

For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of JWL, with its joint ventures JWL Dako Cz India Limited, JWL Kovis (India) Private Limited, JWL Talegria (India) Private Limited and its subsidiaries Habitation Realestate LLP & Jupiter Electric Mobility Private Limited.

 

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 supported by technology tie-ups and partnerships: JWL is one of India’s largest wagon manufacturers, with a capacity of 9,600 wagons per annum with plans to enhance capacity to 12,000 wagons per annum by Q1 fiscal 2025. Over the years, it has gained significant experience and has established strong relationships with government and private customers in iron & steel, power, logistics, mining, cement sectors and other reputed OEMs resulting in steady order inflow. Technology tie ups and partnerships with global entities have strengthened JWLs technical know-how and capabilities. This has resulted in a wide product portfolio and diversification from core wagon manufacturing business. In fiscal 2023, JWL derived ~ 80% revenue from wagon segment, ~15% from commercial vehicle (CV) load bodies and remaining ~5% from sale of containers and other track items. Furthermore, JWL has also ventured in brake disc, brake systems for rolling stock and weldable CMS Crossing manufacturing during fiscals 2023-24 equipping JWL to capitalize on robust spendings for developing high speed train infrastructure, and to fortify its market position in this segment, in Q1 fiscal 2024 JWL has acquired Stone India Limited, having extensive infrastructure and licensing for brake manufacturing. Benefits of robust spendings, onboard of technology partners, healthy order inflow and investments in capacity expansion and strategic backward integration is expected to drive growth in JWLs scale of operations over the medium term.

 

• Improving scale of operations and healthy order book providing revenue visibility: Revenue in fiscal 2023 grew by 76% on year on account of robust order inflow from wagon segment. As such, revenue of over Rs 2528 crore in 9 months of fiscal 2024 was 86% higher than revenue in 9 months of fiscal 2024. Despite robust revenue bookings per quarter, work on hand has sustained in range of Rs 5,953 crore to Rs 7,076 crore in 3 quarters through December 31, 2023. Moreover, JWLs work on hand as on December 31, 2023, from IR and private counterparty to be executed during fiscals 2025-26, providing revenue visibility over medium term and yield order book to operating income ratio of over 2 times. Going forward, successful tender bids and steady & healthy inflow of orders is crucial for sustaining scale of operations and for optimum capacity utilizations while increase in production capacity.

 

• Robust financial risk profile: Strong networth of Rs 790 crore as on March 31, 2023 (estimated around ~Rs 1515 crore on December 31, 2023) support capital structure yielding comfortable gearing and total outside liabilities to total networth ratios of 0.4 time and 1.1 times, respectively for fiscal 2023. Healthy operating performance in 9 months of fiscal 2024 coupled with equity infusion of ~Rs 528 crore in Q1 & Q3 of fiscal 2023 via QIP has further strengthened networth and capital structure. The funds raised are earmarked for capital expenditure (capex), backward integration and working capital requirement. In the absence of large, debt-funded capex, steady cash generation is expected to further strengthen financial flexibility. Furthermore, with limited exposure to external borrowing and healthy operating profitability, debt protection metrices are also comfortable, as reflected in interest coverage improving to 8.7 times on March 31, 2023 (estimated around ~12.2 times on December 31, 2023) from 5.0 times on March 31, 2021 and net cash accruals to adj debt ratio stable at 0.5 time during 3 fiscals through March 31, 2023. Going forward, capex is expected to be funded via internal accruals and equity infusion. However, any major debt-funded capex or investments in JVs along with a rise in working capital requirement will remain a key monitorable.

 

Weaknesses:

• Exposure to risks relating to fluctuation in raw material prices and intense competition: The key inputs include steel and related products. While the IR projects generally have a long execution period and are covered by a price-variation clause to a large extent, private sector orders are generally fixed in nature. Hence, to an extent, the operating profitability of JWL is susceptible to fluctuations in steel prices during the project execution period. On the other hand, pricing power is restricted as the orders are spread across suppliers and are decided based on bids submitted by wagon manufacturers. However, premium bid covering volatility risk, prudent inventory management and superior integration protect margins. As such, cost passthrough is critical for sustenance of operating margins.

 

• Working capital intensive operations: Gross Current Asset (GCA) days were in range of 160-177 days during 3 fiscals through March 31, 2023, driven by sizeable inventory and moderate debtors (100 days and 38 days, respectively as on March 31, 2023) as ~60-70% work on hand comprise of orders from private players. Working capital requirement was also supported by creditors in range of 46-69 days in 3 fiscals through fiscal 2023. Going forward, GCAs are likely to remain around 170-180 days supported by cushion in working capital limits, back-to-back contracts with suppliers, and healthy accrual sufficient to meet the incremental working capital requirement.

Liquidity: Strong

Net cash accruals of around Rs 300-450 crore per fiscal is expected to be sufficient against repayment obligations of Rs 5-10 crore over the medium term and maturing letter of credit of Rs 21 crore during Jan’24-Feb’24. 12-month average fund-based bank limit utilization was around 52% through December 2023. In addition, it will act as a cushion to the liquidity of the company. Current ratio is healthy at 1.42 times on March 31, 2023. Free cash and bank balance was estimated around Rs 392 crore on December 31, 2023 against Rs 117 crores as on March 31, 2023. Low gearing and strong networth support financial flexibility and provide the necessary financial cushion in case of any adverse conditions or downturn in the business. Incremental working capital requirement is expected to be funded by internal accruals, equity infusion and enhancement in non-fund based external borrowings.

Outlook: Stable

CRISIL Ratings believes JWL will continue to benefit from extensive experience of its promoters, its established market position, technology tie-ups and partnerships and continuous backward integration.

Rating Sensitivity factors

Upward factors:

• Sizeable improvement in market position & revenues, driven by substantially improved execution capabilities, stronger order inflow, along with ability to maintain operating margins over 14% resulting in higher net cash accruals.
• Prudent working capital management, stronger financial position, and flexibility with net debt/EBITDA below 1x on sustained basis.

 

Downward factors:

• Delay in capacity expansion, deteriorating the operating performance with operating margins below 10% thus leading to net cash accruals of less than Rs 200 crore.
• Delay in offtake of orders due to raw material supply constraints and/or delays in various regulatory clearances.
• Increase in share of loss in JV and/or rise in working capital requirement exerting pressure on liquidity and capital structure.
• Large, debt funded capex, dividend payout, or substantial rise in working capital requirement on account of stretch in receivables or business diversification exerting pressure on capital structure or liquidity.

About the Company

JWL, (formerly Commercial Engineers and Body Builders Co Limited (CEBBCO)) was incorporated in 1979. The present management of the company through the erstwhile JWL had invested in CEBBCO in 2019 under a debt resolution plan.  JWL amalgamated with CEBBCO through a reverse merger and the combined entity has been listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The company’s name (formerly known as CEBBCO) was changed to Jupiter Wagons Limited (JWL) w.e.f. May 25, 2022.

 

Mr. Murari Lal Lohia is the Chairman Emeritus, Mr. Vivek Lohia is the current Managing Director and Mr. Vikash Lohia is Whole Time Director.

 

JWL is currently engaged in manufacturing railway wagons, wagon components, weldable CMS crossings, load bodies for commercial vehicles and containers. JWL has its manufacturing units located at Kolkata (West Bengal), Jabalpur (Madhya Pradesh), Jamshedpur (Jharkhand), Indore (Madhya Pradesh) and Baddi (Himachal Pradesh). It has capacity to manufacture ~9,600 wagons annually and is backward integrated with a foundry shop to manufacture various components of a typical wagon like couplers, bogies, draft gears, CRF section, etc.

 

JWL has partnerships with leading global companies via Joint Ventures (JVs) for manufacturing brake disc, brake systems for rolling stock and weldable CMS Crossings through JWL Dako Cz India Limited, JWL Kovis (India) Private Limited &JWL Talegria (India) Private Limited.

 

It has recently entered the electric mobility sector through subsidiary, Jupiter Electric Mobility Private Limited, concentrating on e-LCV for last mile delivery. Its subsidiary, Habitation Realestate LLP, has no business operations.

Key Financial Indicator (Combined & CRISIL Ratings Adjusted)

As on / for the period ended March 31		2023	2022
Operating income	Rs crore	2,069.27	1,178.43
Reported profit after tax	Rs crore	120.68	49.66
PAT margins	%	5.83	4.21
Adjusted Debt/Adjusted Net worth	Times	0.37	0.21
Interest coverage	Times	8.74	6.29

 

Any other information: Not applicable

Annexure - Details of Instrument(s)

ISIN	Name of instrument	Date of allotment	Coupon rate (%)	Maturity date	Issue size (Rs.Crore)	Complexity levels	Rating assigned with outlook
NA	Commercial Paper	NA	NA	7 to 365 Days	50	Simple	CRISIL A1+
NA	Cash Credit	NA	NA	NA	39	NA	CRISIL AA-/Stable
NA	Cash Credit	NA	NA	NA	20	NA	CRISIL AA-/Stable
NA	Cash Credit	NA	NA	NA	38	NA	CRISIL AA-/Stable
NA	Cash Credit	NA	NA	NA	30	NA	CRISIL AA-/Stable
NA	Cash Credit	NA	NA	NA	20	NA	CRISIL AA-/Stable
NA	Cash Credit	NA	NA	NA	100	NA	CRISIL AA-/Stable
NA	Cash Credit	NA	NA	NA	63	NA	CRISIL AA-/Stable
NA	Cash Credit	NA	NA	NA	25	NA	CRISIL AA-/Stable
NA	Letter of credit & Bank Guarantee	NA	NA	NA	88	NA	CRISIL A1+
NA	Letter of credit & Bank Guarantee	NA	NA	NA	90	NA	CRISIL A1+
NA	Letter of credit & Bank Guarantee	NA	NA	NA	111	NA	CRISIL A1+
NA	Letter of credit & Bank Guarantee	NA	NA	NA	145	NA	CRISIL A1+
NA	Letter of credit & Bank Guarantee	NA	NA	NA	80	NA	CRISIL A1+
NA	Letter of credit & Bank Guarantee	NA	NA	NA	70	NA	CRISIL A1+
NA	Letter of credit & Bank Guarantee	NA	NA	NA	100	NA	CRISIL A1+
NA	Letter of credit & Bank Guarantee	NA	NA	NA	438	NA	CRISIL A1+
NA	Letter of credit & Bank Guarantee	NA	NA	NA	68.5	NA	CRISIL A1+
NA	Proposed Cash Credit Limit	NA	NA	NA	20	NA	CRISIL AA-/Stable
NA	Proposed Letter of Credit & Bank Guarantee	NA	NA	NA	90	NA	CRISIL A1+

 

Annexure – List of entities consolidated

Names of Entities Consolidated	Extent of Consolidation	Rationale for Consolidation
Jupiter Wagons Limited (JWL)	Full	Holding Company
Habitation Realestate LLP	Full	90% Subsidiary
Jupiter Electric Mobility Private Limited	Full	60% Subsidiary
JWL Dako Cz India Limited	Proportionate	50% Joint Venture
JWL Kovis (India) Private Limited	Proportionate	50% Joint Venture
JWL Talegria (India) Private Limited	Proportionate	50% Joint Venture