| Roto Pumps Limited | ||||||
| Rating outlook revised to 'Stable'; Ratings Reaffirmed | ||||||
| Rating Action | ||||||
| ||||||
| 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 revised its outlook on the long-term bank facilities of Roto Pumps Ltd (RPL; part of the RPL group) to ‘Stable’ from ‘Positive’ while reaffirming the rating at ‘CRISIL A-‘. The short term rating has been reaffirmed at ‘CRISIL A2+'.
The revision in outlook reflects delay of 12-15 months in commencement of operations of the solar pump segment against the expectations of CRISIL Ratings. The delay has led to moderation in expected revenue to Rs 330-350 crore in fiscal 2025 which is lower than expected. Operating income grew around 21% in fiscal 2024 to Rs 276 crore from Rs 228 crore in fiscal 2023, driven by increased sales from the existing product line. Improvement in operating income driven by successful ramp up of phase-wise capital expenditure (capex) for manufacturing solar pumping systems and mud motors will remain a key monitorable.
The operating margin is expected to sustain at 23-25% over the medium term, supported by the presence of high value addition products in the portfolio.
The ratings also factor in the company’s established market position backed by the promoters’ extensive experience and strong financial risk profile, driven by healthy networth expected at Rs 220-230 crore as on March 31, 2025, backed by continuous accretion to reserves. Gearing was below 0.25 time over the three fiscals ended March 31, 2024. Debt protection metrics were comfortable, as indicated by expected interest coverage and net cash accrual to adjusted debt ratios of 18-19 times and 2-2.1 times, respectively, in fiscal 2024. These strengths are partially offset by the modest scale of operations and large working capital requirement. |
Analytical approach CRISIL Ratings has combined the business and financial risk profiles of RPL, its wholly owned subsidiaries, Roto Pumps America Inc; Roto Pumpen GMBH, Germany; Roto Energy Systems Ltd; Roto Overseas Pte Ltd and Roto Pumps Mena, FZE; and step-down subsidiaries, Roto Pumps North America, Inc; Roto Pumps (Malaysia) SDN BHD; Roto Pumps (Africa) Pty Ltd. This is because all these entities, collectively referred to as the RPL group, are in the same business and have strong business and financial linkages. RPL holds 100% equity in Roto Pumps America Inc, Roto Pumpen GMBH, Roto Energy Systems Ltd.Roto Overseas Pte Ltd and Roto Pumps Mena, FZE
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 and extensive experience of the promoters: Revenue increased at compound annual growth rate of 29% over the three fiscals through 2024, driven by the five-decade-long presence of the promoters in the high value-added industrial pumps industry, geographically diversified revenue profile and established relationships with customers and suppliers. The ability to develop products to cater to upcoming sectors may enhance growth over the medium term. The group will continue to benefit from the expertise of its management team and healthy customer relationships.
Healthy operating profitability: The operating margin of the group has ranged between 25% and 27% over the three fiscals through 2024, backed by its ability to pass on hikes in steel prices to customers without a major lag. The group follows different pricing mechanisms for its domestic and overseas markets. The operating margin stood at 25% in fiscal 2024, against 25.5% in fiscal 2023. In-house research and development facilities and niche product offerings should help the margin sustain at 23-25% over the medium term. Return on capital employed was healthy at 27% in fiscal 2024.
Comfortable financial risk profile: Networth and gearing are expected to be Rs 220-230 crore and below 0.15 time, respectively, as on March 31, 2025. The capital structure will be aided by healthy profitability and steady accretion to reserves over the medium term. Debt protection metrics are expected to be healthy supported by interest coverage ratio of 18-19 times and net cash accrual to adjusted debt ratio of 2-2.1 times in fiscal 2025.
Weaknesses: Modest scale of operations amid intense competition: Intense competition from several small and mid-sized players and global entities restricts scalability, as reflected in revenue of Rs 276 crore in fiscal 2024. Though the scale is likely to improve through multiple product offerings by venturing into new end-user industries, the ability of the group to ramp-up operations through planned capex and geographical expansion will remain key rating sensitivity factors.
Large working capital requirement: Gross current assets (GCAs) were sizeable at 208 days as on March 31, 2024, driven by large inventory and receivables. The group maintains sizeable inventory considering its vast product range, high lead time for manufacturing and significant revenue contribution from exports (around 70%). Receivables and inventory were 70-100 days and 90-120 days, respectively, over the five fiscals through 2024. Commensurate with the increase in scale of operations, the working capital cycle is expected to remain at 220-230 days in the near term. |
Liquidity: Strong Expected cash accrual of Rs 55-85 crore per annum will comfortably cover yearly debt obligation of Rs 2-4 crore and working capital requirement over the medium term. The fund-based limit was utilised at 52% on average during the 12 months through July 2024. Unencumbered cash and equivalent stood at Rs 25 crore as on March 31, 2024. |
Outlook: Stable The RPL group will continue to benefit from its established track record, increasing scale of operations and extensive experience of its promoters. |
Rating Sensitivity Factors Upward factors:
Downward factors:
|
About the group RPL manufactures different types of industrial pumps, such as progressive cavity and single- and twin-screw variants. These pumps are specialised and custom-made and used in industries where the fluid viscosity is high. They are also used in wastewater treatment, oil and gas, marine and sugar industries. RPL is listed on the Bombay Stock Exchange and the National Stock Exchange and is based in Noida, Uttar Pradesh. |
Key financial indicators (Consolidated)
|
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
Annexure - List of Entities Consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||
|
Criteria Details
|