Rating Rationale
July 17, 2024 | Mumbai
Rashi Peripherals Limited
Ratings reaffirmed at 'CRISIL A+/Positive/CRISIL A1'
 
Rating Action
Total Bank Loan Facilities RatedRs.1700 Crore
Long Term RatingCRISIL A+/Positive (Reaffirmed)
Short Term RatingCRISIL A1 (Reaffirmed)
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 loan facilities of Rashi Peripherals Limited (RPL; Erstwhile Rashi Peripherals Private Limited) at ‘CRISIL A+/Positive/CRISIL A1’.

 

The ratings continue to factor RPL's solid and established market position in the IT and peripheral products distribution business, improving product and geographical diversification in revenues, and its strong risk management practices. The rating is also supported by the company's healthy financial risk profile. The above rating strengths are partially offset by its modest though improving operating margins and working capital-intensive nature of the distribution business.

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.

Key Rating Drivers & Detailed Description

Strengths:

  • Established position in IT product distribution and long-standing relationships with recognized principals and diversified geographical footprint: RPPL ranks among the top five Category-B IT hardware distributors in India. The company has a healthy network of 51 branches and warehouses. On back of strong distribution network with over 9915 channel partners company cater to over 705 towns/cities across India. RPPL enjoys strong product as well as vendor profiles. Moreover, RPPL has had a long-standing relationship with principals such as Asus, SanDisk, Lenovo, Toshiba and Hewlett-Packard and has also made significant vendor additions in the recent past, including brands such as Samsung and LG. Revenue from these new brands are also on increasing trend. Company reported revenue of Rs.10731 Crores in fiscal 2024, year-on-year growth of 15.8%.

 

CRISIL Ratings believes that RPPL will continue to benefit from its established market position in the domestic IT hardware distribution business and continued healthy demand for its products.

 

  • Effective risk management policies and efficient working capital management: RPPL gets complete price protection from its principal vendors so that any price changes can be passed on to the customers without affecting RPPL's operating margins. Moreover, RPPL hedges any net foreign currency exposures arising from import of products. Further, the company adheres to stringent credit assessment norms and provisioning policies, such as selling products against post-dated cheques or on immediate-payment basis to dealers, which help minimize the credit risks. This has resulted in efficient working capital management and stable operating margins.

 

  • Healthy debt protection metrics: RPL’s debt protection metrics have been at healthy level despite moderate profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 2.65 times and 9 times for fiscal 2024. RPL debt protection measures are expected to healthy over medium term.

 

Weaknesses:

  • Low operating margins due to intense competition: The IT product distribution business is oligopolistic and thus a low operating margin business. RPPL also 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 provide price competition to the established principals that can affect the profitability of their distributors like RPPL. This risk is mitigated by RPPLs ability to add new vendors and increase its product basket. Company’s operating margin was 2.64% in fiscal 2024.

 

  • Susceptibility to the performance of principals: Lenovo, Asus, Hewlett-Packard, SanDisk and Western Digital contribute around 70-71% to the sales of RPPL. Deterioration in the performance of these suppliers especially drop in their market share could adversely impact the business of RPPL. Similarly, product categories such as personal-computing devices, peripherals, and components contribute over 85% to 90% of sales. Although RPPL 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 73 percent for the past twelve months ended May 2024. Cash accrual are expected to be over Rs 200 crore which are sufficient against nil term debt obligation. In addition, it will act as cushion to the liquidity of the company.

 

Current ratio are moderate at 1.6 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: Positive

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

Rating Sensitivity factors

Upward factors:

  • Diversification in revenue profile and revenue growth of over 20% while maintaining operating margin resulting in higher accruals.
  • Sustenance of improved financial risk profile with total outside liabilities to adjusted networth remaining below 1.5 times.
  • Improvement in working capital cycle.

 

Downward factors:

  • Significant fall in revenue and operating margin leading to decline in net cash accruals.
  • 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 times.

About the Company

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 also listed on NSE and BSE.

Key Financial Indicators

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

10731

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 the instrument Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Fund-Based Facilities NA NA NA 1311.3 NA CRISIL A+/Positive
NA Non-Fund Based Limit NA NA NA 133 NA CRISIL A1
NA Overdraft Facility NA NA NA 34.2 NA CRISIL A+/Positive
NA Short Term Bank Facility& NA NA NA 200 NA CRISIL A1
NA Proposed Long Term Bank Loan Facility NA NA NA 21.5 NA CRISIL A+/Positive

& - Interchangeable with cash credit limit

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/ST 1567.0 CRISIL A+/Positive / CRISIL A1 22-03-24 CRISIL A+/Positive / CRISIL A1 31-03-23 CRISIL A/Positive 04-11-22 CRISIL A/Positive 23-09-21 CRISIL A/Stable Withdrawn
      -- 19-03-24 CRISIL A+/Positive 08-03-23 CRISIL A/Positive   -- 31-08-21 CRISIL A/Stable --
Non-Fund Based Facilities ST 133.0 CRISIL A1 22-03-24 CRISIL A1 31-03-23 CRISIL A1 04-11-22 CRISIL A1 23-09-21 CRISIL A1 Withdrawn
      -- 19-03-24 CRISIL A1 08-03-23 CRISIL A1   -- 31-08-21 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 127.5 Standard Chartered Bank Limited CRISIL A+/Positive
Fund-Based Facilities 95 ICICI Bank Limited CRISIL A+/Positive
Fund-Based Facilities 80 ICICI Bank Limited CRISIL A+/Positive
Fund-Based Facilities 200 The Hongkong and Shanghai Banking Corporation Limited CRISIL A+/Positive
Fund-Based Facilities 80 IndusInd Bank Limited CRISIL A+/Positive
Fund-Based Facilities 100 Axis Bank Limited CRISIL A+/Positive
Fund-Based Facilities 186.7 HDFC Bank Limited CRISIL A+/Positive
Fund-Based Facilities 30 Standard Chartered Bank Limited CRISIL A+/Positive
Fund-Based Facilities 120 IndusInd Bank Limited CRISIL A+/Positive
Fund-Based Facilities 25 ICICI Bank Limited CRISIL A+/Positive
Fund-Based Facilities 25 Standard Chartered Bank Limited CRISIL A+/Positive
Fund-Based Facilities 80 Axis Bank Limited CRISIL A+/Positive
Fund-Based Facilities 161 HDFC Bank Limited CRISIL A+/Positive
Fund-Based Facilities 1.1 HDFC Bank Limited CRISIL A+/Positive
Non-Fund Based Limit 8 HDFC Bank Limited CRISIL A1
Non-Fund Based Limit 75 Axis Bank Limited CRISIL A1
Non-Fund Based Limit 50 IndusInd Bank Limited CRISIL A1
Overdraft Facility 34.2 HDFC Bank Limited CRISIL A+/Positive
Proposed Long Term Bank Loan Facility 21.5 Not Applicable CRISIL A+/Positive
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
Understanding CRISILs Ratings and Rating Scales

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