| Lakshmi Electrical Control Systems Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 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 ratings on the bank facilities of Lakshmi Electrical Control Systems Limited (LECS) at ‘CRISIL A-/Stable/CRISIL A1’
The rating continues to reflect the established relationship with Lakshmi Machine Works Ltd (LMW) leading to regular orders. The ratings also factor in the company's strong financial risk profile because of low gearing and robust debt protection metrics, and its ample liquidity. These strengths are partially offset by the susceptibility of its operating performance to volatility in raw material prices and to cyclicality in the textile industry. |
Key Rating Drivers & Detailed Description Strengths: Established relationship with LMW: LMW cater to about 80 percent of the overall revenues of LECS, with regular and steady orders for control panels. Both entities enjoy high synergies because of integration and common management. However, LECS has also taken concrete measures to diversify its customer base with addition of customers from the automotive and engineering sectors to minimize its exposure to customer concentration risk.
Strong financial risk profile: LECS has a healthy financial risk profile, with minimal debt and strong net worth. As on March 2022, LECS had a net worth of Rs.212.26 crore and total outside liabilities to tangible net worth ratio of around 0.30 times. LECS's net worth is expected to gradually improve over the medium term supported by moderate accretion to reserves; while the capital structure is expected to remain sustained supported by the absence of debt funded capital expenditure.
Weakness: Susceptibility of its operating performance to volatility in raw material prices and to cyclicality in textile industry: LECS's primary raw materials are plastic components, the prices of which are highly volatile and may have an impact on operating margins. However, LECS has been able to pass on increases in raw material prices to LMW, albeit with a lag. Additionally, the company manufactures low-cost components largely for textile machinery, exposing it to slowdown in sales due to any downturns in the textile industry. |
Liquidity: Adequate Bank limit utilisation is moderate at around 45 percent for the past twelve months ended Apr 2023. Cash accruals are expected to be over Rs 15-17 Cr which are sufficient against no term debt obligation repayment. In addition, it will be act as cushion to the liquidity of the company. Current ratio is expected to be healthy at more than 2 times over the medium term.
Extensive exposure to group companies: LECS has invested Rs.85.5126 crore in its group companies in the form of equity, loans and advances as on March 31, 2022 which is 40 percent of its current net worth. CRISIL believes that any further exposure in the group companies, impinging its own cash accrual may impact liquidity and will remain a rating sensitivity factor. 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 believes LECS will maintain its healthy financial risk profile, in the absence of significant debt-funded capital expenditure (capex), over the medium term. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company LECS manufactures control panels for textile machinery and generates most of its revenue from LMW. The company forms part of LMW group, and supplies control panels, which are used in manufacture of textile machinery. Additionally, the company manufactures plastic components which are used in automobile and engineering industries. The company is managed by Chairperson and Managing Director, Ms Nethra J S Kumar |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
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Criteria Details
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