Rating Rationale
July 26, 2024 | Mumbai
Macfos Limited
'CRISIL BBB/Stable' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.30 Crore
Long Term 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’ rating to the long term bank facilities of Macfos Ltd (Macfos).

 

The rating reflects the extensive experience of the promoters in the electronics e-retailing business, their established relationships with customers and suppliers, and the comfortable financial risk profile of the company. These strengths are partially offset by the growing yet moderate scale of operations and exposure to intense competition.

Key rating drivers & detailed description

Strengths:

  • Experienced promoters and relationship with customers and suppliers: The decade-long experience of the technocrat promoters in the  electronics e-retailing industry, their strong understanding of market dynamics, and established relationships with diverse suppliers and customers, will continue to support the business risk profile. Macfos has principals/vendors in India as well as abroad, and is the exclusive distributor in India, for players such as Seeed Studio, Arduino, Eda-Tech, M5Stack, K5 Propulsion, Upside Down Labs, among others. With more than 18,500 stock-keeping units (SKUs), over 135 brands and tie-ups with over 180 vendors, Macfos caters to diverse consumers, including manufacturers, corporates, educational institutions, researchers and developers, etc. Macfos will continue to benefit from its established distribution network, in-house IT infra in the e-commerce space and its wide product portfolio.

 

  • Comfortable capital structure: Capital structure is marked by networth of Rs 27 crore as on March 31, 2024. Low reliance on external debt has led to healthy gearing and total outside liabilities to tangible networth (TOL/TNW) ratios of 0.3 time and 0.8 time, respectively,  as on the same date. With recently raised sizable equity capital, plough back of profits, and in the absence of any large, debt-funded capital expenditure (capex) plans, gearing should considerably improve further.

 

Weaknesses:

  • Growing but moderate scale of operations: Revenue has recorded a compound annual growth rate of around 67% over the three fiscals ended March 31, 2024, driven by the increasing no of SKUs, healthy order inflow and wider customer base. Revenue stood at Rs 126 crore in fiscal 2024, with the e-commerce segment contributing around 45% and rest from B2B business. Average revenue per order and customer has been growing consistently over the years. Nevertheless, sustained growth in scale is a key monitorable.

 

  • Exposure to intense competition: Macfos faces competition from domestic and global e-commerce portals such as Amazon, Flipkart etc., direct sellers/manufacturers and other unorganised players. Intense competition requires players to provide periodic discounts and attractive schemes in order to stave-off competition and retain customers. Though this could adversely impact profitability, Macfos has maintained a comfortable operating margin of 11-16% for the four fiscals ended March 31, 2024. Aggressive expansion by existing competitors and emergence of large players may impinge upon profitability and scalability of Macfos, and need to be monitored closely.

Liquidity: Adequate

Bank limit utilisation is moderate, averaging around 59% for the 14 months ended May 31, 2024. Expected cash accrual of over Rs 12-25 crore should comfortably cover the term debt obligation of Rs 1.5-2.5 crore over the medium term. Current ratio is healthy at 2.58 times on March 31, 2024.

Outlook: Stable

Macfos will continue to benefit from its established distribution network and wide product portfolio in the e-commerce space.

Rating sensitivity factors

Upward factors:

  • Substantial and sustained revenue growth and stable operating margin above 12%, leading to higher cash accruals
  • Sustenance of comfortable financial profile and liquidity, with controlled working capital cycle

 

Downward factors:

  • Decline in revenue and/or operating margin, leading to net cash accruals consistently below Rs 10 crore
  • Substantial increase in working capital requirement, or any large, debt-funded capex, weakening liquidity and financial risk profile

About the Company

Macfos is engaged in e-retailing of electronics items through its e-commerce store website ‘Robu.in’ and mobile applications. Products include robotic parts, drone parts, e-bike parts, internet of things and wireless items, 3D printers and their parts, do-it-yourself learning kits, development boards, raspberry Pi (single board computers and peripherals), sensors, motors, motor drivers, pumps, batteries, chargers, electronic modules & displays and various other mechanical and electronic components.

 

It is listed on the SME platform of the Bombay Stock Exchange.

 

Operations are managed by the promoters, Mr Atul Maruti Dumbre, Mr Nileshkumar Purushottam Chavhan and Mr Binod Prasad.

Key financial indicators

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

126.4

80.17

Reported profit after tax

Rs crore

10.8

7.38

PAT margin

%

8.5

9.24

Adjusted debt/Adjusted networth

Times

0.3

0.40

Interest coverage

Times

12.9

11.26

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 Cash credit NA NA NA 16 NA CRISIL BBB/Stable
NA Proposed fund-based bank limits NA NA NA 4.7 NA CRISIL BBB/Stable
NA Working capital facility NA NA NA 9.3 NA CRISIL BBB/Stable
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 30.0 CRISIL BBB/Stable   --   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 16 ICICI Bank Limited CRISIL BBB/Stable
Proposed Fund-Based Bank Limits 4.7 Not Applicable CRISIL BBB/Stable
Working Capital Facility 9.3 DBS Bank Limited CRISIL BBB/Stable
Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Approach to Financial Ratios

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