Rating Rationale
September 04, 2023 | Mumbai
Rishabh Instruments Limited
Ratings reaffirmed at 'CRISIL BBB/Stable/CRISIL A3+'
 
Rating Action
Total Bank Loan Facilities RatedRs.16.3 Crore
Long Term RatingCRISIL BBB/Stable (Reaffirmed)
Short Term RatingCRISIL A3+ (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 ‘CRISIL BBB/Stable/CRISIL A3+’ ratings on the bank loan facilities of Rishabh Instruments Ltd (RIL; part of the Rishabh group).

 

The ratings continue to reflect the group's established position in the industrial control products (ICPs) and testing and measuring instruments (TMI) business, and healthy financial risk profile. These strengths are partially offset by large working capital requirement.

 

Operating income rose to Rs 571.86 crore in fiscal 2023 from Rs 471 crore in fiscal 2022 driven by volume growth. Operating margin stood at 14.3% in fiscal 2023, against 16.25% in fiscal 2022, despite the Russia-Ukraine war impacting the profitability of its Polish subsidiaries. On standalone basis, the company posted revenue of Rs 58 crore in the first quarter of fiscal 2024. Moderate revenue growth and sustained operating margin will support the business risk profile over the medium term.

 

The financial risk profile was comfortable, with gearing around 0.27 time as on March 31, 2023, and adequate interest coverage ratio of 14.52 times in fiscal 2023. RIL is in the process of listing on the Bombay Stock Exchange and the National Stock Exchange and intends to raise Rs 491 crore.

Analytical approach

CRISIL Ratings has combined the business and financial risk profiles of RIL and its subsidiaries and step-down subsidiaries. This is because the entities, collectively referred to as the Rishabh group, have common management, significant operational synergies and financial fungibility.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key rating drivers and detailed description

Strengths:

  • Established market position: The Rishabh group is a leading player in the ICP and TMI business. Operating income was Rs 571.8 crore in fiscal 2023. RIL’s standalone revenue remained in the range of Rs 134 crore to Rs 192 crore in the four fiscals through 2023. Bulk of the revenue is derived from overseas operations. Over the years, the company has expanded its product portfolio and geographically diversified, supporting the group’s market position.

 

  • Healthy financial risk profile: Owing to steady accretion to reserve, networth was robust at Rs 382.13 crore and gearing was healthy at 0.27 time as on March 31, 2023. Debt protection metrics were strong driven by moderate profitability and limited debt, as reflected in interest coverage and net cash accrual to total debt ratios of 14.52 times and 0.68 time, respectively, in fiscal 2023. The financial risk profile will remain healthy in fiscal 2025 aided by stable debt and healthy accretion.

 

RIL will buy back the compulsory convertible preference shares (CCPS) raised in fiscal 2014 from the private equity (PE) fund South Asia Clean Energy fund (SACEF). With RIL’s listing, the financial risk profile should improve. However, successful completion of initial public offering (IPO) and buyback will remain a key monitorable.

 

Weakness:

  • Large working capital requirement: Operations are working capital intensive, as reflected in gross current assets of over 261 days as on March 31, 2023, driven by sizeable receivables and inventory. The GCAs were at 200 days in the past. The working capital requirement is funded through internal accrual, resulting in limited reliance on bank lines.

Liquidity: Adequate

Bank limit utilisation was low at 35.2% on average for the 13 months through June 2023. Cash accrual, expected at Rs 80-85 crore per annum, will sufficiently cover yearly term debt obligation of Rs 10-12 crore over the medium term. In addition, the surplus will cushion liquidity.

Current ratio was healthy at 2 times as on March 31, 2023, and is expected at a similar level over the medium term.

Outlook: Stable

CRISIL Ratings believes the Rishabh group will sustain its market position over the medium term backed by large product basket, healthy relationships with customers, diversified markets and competent management.

Rating sensitivity factors

Upward factors:

  • Growth of over 20% in revenue and stable profitability resulting in higher cash accrual
  • Improvement in the working capital cycle and maintenance of healthy financial risk profile and liquidity

 

Downward factors:

  • Decline in revenue and profitability leading to cash accrual below Rs 25 crore
  • Leverage capital structure or weakened liquidity owing to large debt-funded capital expenditure or acquisition

About the company

Incorporated in 1985, RIL manufactures, designs and develops ICPs, such as transducers, analogue and digital panel meters and electrical TMIs, such as hand-held multimeters, and digital and analogue insulation testers.

About the group

The Rishabh group manufactures electronic testing and measurement instruments, industrial panel devices, solar strings and aluminum high pressure die-casting products. It has manufacturing facilities in Nashik, Poland and China, with modification centers in the US and the UK. The group is promoted by Mr Narendra Goliya.

Key financial indicators (consolidated)

As on / for the period ended March 31

 

2023

2022

Operating income

Rs crore

571.86

471.79

Reported profit after tax (PAT)

Rs crore

48.19

50.30

PAT margin

%

8.69

10.52

Adjusted debt / adjusted networth

Times

0.27

0.30

Interest coverage

Times

14.52

19.68

 

Key financial indicators (standalone)

As on / for the period ended March 31

 

2023

2022

Operating income

Rs crore

196.54

153.83

Reported PAT

Rs crore

17.35

13.09

PAT margin

%

9.50

8.51

Adjusted Debt/Adjusted Net worth

Times

0.09

0.18

Interest coverage

Times

11.45

15.03

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 12 NA CRISIL BBB/Stable
NA Letter of credit NA NA NA 3 NA CRISIL A3+
NA Term loan NA NA Mar-28 1.3 NA CRISIL BBB/Stable

Annexure – List of entities consolidated

Names of entities consolidated

Extent of consolidation

Rationale for consolidation

Rishabh Instruments Ltd

Full

--

Energy Solution Labs Pvt Ltd

Full

Subsidiary; same line of business and financial fungibility

Dhruv Enterprises Ltd

Full

Subsidiary; same line of business and financial fungibility

Sifam Tinsley Instrumentation Inc

Full

Subsidiary; same line of business and financial fungibility

Shanghai VA Instrument Co Ltd

Full

Subsidiary; same line of business and financial fungibility

Lumel Spolka Akcyina

Full

Step-down subsidiary; same line of business and financial fungibility

Sifam Tinsley Instrumentation Ltd

Full

Step-down subsidiary; same line of business and financial fungibility

Lumel Alucast, Zielona Góra, Poland

Full

Step-down subsidiary; same line of business and financial fungibility

Lumel Śląsk Sp ZOO

Full

Step-down subsidiary; same line of business and financial fungibility

Przedsiebiorstwo Wdrozeniowe INMEL Sp ZOO

Full

Associate company; common management, same line of business and financial fungibility
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 13.3 CRISIL BBB/Stable   -- 06-06-22 CRISIL BBB/Stable 10-03-21 CRISIL BBB/Stable 05-02-20 CRISIL BBB/Stable CRISIL BB+ /Stable(Issuer Not Cooperating)*
Non-Fund Based Facilities ST 3.0 CRISIL A3+   -- 06-06-22 CRISIL A3+ 10-03-21 CRISIL A3+ 05-02-20 CRISIL A3+ CRISIL A4+ (Issuer Not Cooperating)*
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 12 State Bank of India CRISIL BBB/Stable
Letter of Credit 3 State Bank of India CRISIL A3+
Term Loan 1.3 State Bank of India CRISIL BBB/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Engineering Sector
CRISILs Criteria for rating short term debt
CRISILs Criteria for Consolidation

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