Rating Rationale
January 06, 2025 | Mumbai
Rashi Peripherals Limited
Ratings upgraded to 'CRISIL AA-/Stable/CRISIL A1+'
 
Rating Action
Total Bank Loan Facilities RatedRs.1700 Crore
Long Term RatingCRISIL AA-/Stable (Upgraded from 'CRISIL A+/Positive')
Short Term RatingCRISIL A1+ (Upgraded from 'CRISIL A1')
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 of Rashi Peripherals Limited (RPL; Erstwhile Rashi Peripherals Private Limited) to ‘CRISIL AA-/Stable/CRISIL A1+’ from ‘CRISIL A+/Positive/CRISIL A1’ .

 

The ratings action reflect the expected improvement in the business risk profile backed by increasing scale and stable profitability. Revenues have increased by around 43% in the first half of fiscal 2025 year on year (standalone), and this growth momentum is expected to continue in fiscal 2025 for the company driven by healthy demand for Personal Computing, Enterprise, and Cloud Solutions (PES) products as well as other IT products and services. 
 

 Though operating margins declined to 2.37% in H1FY25 from 2.9% in H1FY24 driven by change in product mix, CRISIL Ratings expects RPL will continue to sustain healthy growth in revenues over the medium, supported by improving product basket and geographical diversification, as well as healthy demand for the IT products, which will help RPL further solidify its established market position in these product segments. Operating margins are expected to sustain at ~2.8% to 2.9% over the medium term.
 

Further, financial risk profile is expected to improve with gradual reduction in total outside liabilities to adjusted networth ratio on the back of healthy accretion to reserves, with no major debt requirements over the medium term.

 

The ratings continue to reflect RPL's established position in IT hardware distribution business, long-standing relationships with recognized principals & diversified geographical footprint. Ratings also factors in effective risk management policies and efficient working capital management leading to sound operating efficiencies and healthy debt protection metrics. These strengths are partially offset by susceptibility to the performance of principals, low operating margins due to intense competition and moderately aggressive capital structure.

Analytical Approach

CRISIL Ratings has treated unsecured loan of Rs 27.36 crore from Promoter family as on 31st March 2024 as neither debt nor equity since these are expected to remain in business in near term. CRISIL Ratings has evaluated the standalone business and financial risk profiles of RPL.

Key Rating Drivers & Detailed Description

Strengths:

  • Collaboration with industry leading principals for more than 2 decades: RPL has collaborated with 53 global technology brands. Major principals include many world-renowned names in the IT industry, like San Disk, Lenovo, HP, Dell, Asus, Western Digital etc. Further, the company is working towards expansion of its portfolio in both IT segment by venturing into new brands, this is further expected to support revenue growth going ahead. The established relationship with industry’s leading principals helps RPL towards favourable credit terms. Also, better collaboration with principals’ de-risk RPL from any risks of product and technology related obsolescence.

 

  • Strong market position backed by diversified revenue mix: RPL ranks among the major three IT hardware distributors in India with significant market share. The company has a healthy network of 52 branches and 67 warehouses covering 724 locations in India through an ecosystem of 10600 plus customers, as of September 30, 2024. RPL not only enjoys diversified and strong product profile but also principal profiles. CRISIL Ratings believes that RPL will further improve its business risk profile over the medium term, on the back of its established market position in the domestic IT hardware distribution business and continued healthy demand for its products.

 

  • Strong financial risk profile:  RPLs financial risk profile is strong indicated by a strong networth of Rs. 1639 crore as on Sept 30, 2024 and it is expected to over Rs.1750 Crores by fiscal year end 2025 backed by healthy accretion to reserves. With incremental working capital requirement being partially funded through internal cash accruals and in the absence of any large debt-funded capital expenditure (capex) or acquisition, TOLANW ratio is expected to remain below 1.50 times and would remain a key monitorable over the medium term. Debt protection metrics are comfortable marked by interest coverage ratio of 5.92 times as on Sept 30, 2024 and is expected to remain healthy over the medium term due to limited reliance on external debt

 

Weaknesses:

  • Operating margins constrained by intense competitive dynamics: The IT product distribution business, although oligopolistic, is a low operating margin business. Further, RPL faces stiff competition from larger and more established players in getting distributorship rights for lucrative geographies from principals. Moreover, products from newer, less-established brands could face price competition from the established principals that in turn can affect the profitability of their distributors. As a result, operating margin has remained around 2.6 % to 2.7 % over last 2 years ended fiscal 2024 and was at 2.37% for H1FY25.

 

  • Susceptibility to the performance of principals: Lenovo, Asus, Hewlett-Packard, SanDisk and Western Digital contribute around 70-71% to the sales of RPL. Deterioration in the performance of these suppliers especially drop in their market share could adversely impact the business of RPL. Similarly, product categories such as personal-computing devices, peripherals, and components contribute over 85% to 90% of sales. Although RPL continues to add principals and product categories, their contribution to revenue is not yet significant however they are on increasing trend. Any major disruptive change in technology and intense competition among principals may, however, impact the business risk profile materially.

Liquidity: Strong

Bank limit utilization is moderate at around 53 percent for the past twelve months ended September 2024. Cash accruals are expected to be over Rs 230 crore which are sufficient against nil term debt obligation. Current ratio was moderate at 1.65 times on March 31, 2024. The promoters are likely to extend support in the form of equity and unsecured loans to meet its working capital requirements and repayment obligations.

Outlook: Stable

CRISIL Ratings believes RPL will continue to maintain its healthy growth backed by strong market position in the technology products distribution business, along with a strong financial risk profile driven by an experienced management team.

Rating sensitivity factors

Upward factors:

  • Sustained revenue growth and operating margins, leading to net cash accrual above Rs.400 Crores
  • Improvement in working capital cycle.

 

Downward factors:

  • Significant fall in revenues and operating margins leading to decline in net cash accruals below Rs.150 Crores.
  • Stretch in the working capital cycle, significant debt-funded acquisition or capex, or any change in risk management policies, resulting in increase in total outside liabilities to tangible net worth above 2.5 times.

About the Company

RPL was incorporated in 1989 by chartered accountants, Mr. Suresh Pansari and Mr. K K Choudhary. The company is a distributor of, and after-sales service provider for, personal computers and notebooks, mobile phones, wearable, IT consumables, printers, peripherals, networking products, storage products, UPS and invertors. Company is also listed on NSE and BSE and is professionally managed.

Key Financial Indicators

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

10,731

9,263

Reported profit after tax

Rs crore

133

123.07

PAT margins

%

1.24

1.33

Adjusted Debt/Adjusted Net worth

Times

0.43

1.55

Interest coverage

Times

2.65

2.90

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 Fund-Based Facilities NA NA NA 1323.50 NA CRISIL AA-/Stable
NA Non-Fund Based Limit NA NA NA 176.50 NA CRISIL A1+
NA Short Term Bank Facility& NA NA NA 200.00 NA CRISIL A1+

 & - Interchangeable with cash credit limit

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 ST/LT 1523.5 CRISIL A1+ / CRISIL AA-/Stable   -- 17-07-24 CRISIL A+/Positive / CRISIL A1 31-03-23 CRISIL A/Positive 04-11-22 CRISIL A/Positive CRISIL A/Stable
      --   -- 22-03-24 CRISIL A+/Positive / CRISIL A1 08-03-23 CRISIL A/Positive   -- CRISIL A/Stable
      --   -- 19-03-24 CRISIL A+/Positive   --   -- --
Non-Fund Based Facilities ST 176.5 CRISIL A1+   -- 17-07-24 CRISIL A1 31-03-23 CRISIL A1 04-11-22 CRISIL A1 CRISIL A1
      --   -- 22-03-24 CRISIL A1 08-03-23 CRISIL A1   -- CRISIL A1
      --   -- 19-03-24 CRISIL A1   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Fund-Based Facilities 100 Axis Bank Limited CRISIL AA-/Stable
Fund-Based Facilities 361 HDFC Bank Limited CRISIL AA-/Stable
Fund-Based Facilities 30 Standard Chartered Bank CRISIL AA-/Stable
Fund-Based Facilities 127.5 Standard Chartered Bank CRISIL AA-/Stable
Fund-Based Facilities 95 ICICI Bank Limited CRISIL AA-/Stable
Fund-Based Facilities 80 ICICI Bank Limited CRISIL AA-/Stable
Fund-Based Facilities 200 The Hongkong and Shanghai Banking Corporation Limited CRISIL AA-/Stable
Fund-Based Facilities 80 IndusInd Bank Limited CRISIL AA-/Stable
Fund-Based Facilities 120 IndusInd Bank Limited CRISIL AA-/Stable
Fund-Based Facilities 25 ICICI Bank Limited CRISIL AA-/Stable
Fund-Based Facilities 25 Standard Chartered Bank CRISIL AA-/Stable
Fund-Based Facilities 80 Axis Bank Limited CRISIL AA-/Stable
Non-Fund Based Limit 8 HDFC Bank Limited CRISIL A1+
Non-Fund Based Limit 50 IndusInd Bank Limited CRISIL A1+
Non-Fund Based Limit 43.5 Axis Bank Limited CRISIL A1+
Non-Fund Based Limit 75 Axis Bank Limited CRISIL A1+
Short Term Bank Facility& 200 Citibank N. A. CRISIL A1+
& - Interchangeable with cash credit limit
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for rating trading companies
CRISILs Criteria for rating short term debt

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