| Samrat Forgings Limited | ||||||
| Long-term rating upgraded to 'CRISIL BB+/Stable'; short-term rating reaffirmed | ||||||
| Rating Action | ||||||
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| 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 rating on the long-term bank facilities of Samrat Forgings Limited (SFL) to 'CRISIL BB+/Stable' from 'CRISIL BB/Stable' and has reaffirmed its 'CRISIL A4+' rating on the short-term bank facilities.
The upgrade reflects an improvement in the business risk profile, driven by steady growth in revenue and a stable operating margin. Company recorded a compounded annual growth rate (CAGR) of 14% over the three fiscals through March 2022. Operating margin was estimated at 9.05% in fiscal 2022. Net sales rose by 18% in fiscal 2022 to Rs 139.63 crore, driven by growth in volume and realizations.
Revenue is expected to grow by over 20% in fiscal 2023, and by 8-10% per fiscal over the medium term, while the operating margin is likely to sustain at 9-10% going forward, driven by technological upgradation. The established market position of the company, healthy relationships with original equipment manufacturers (OEMs) and strong demand from the tractor segment will further aid growth. SFL caters to leading OEMs such as Mahindra & Mahindra Ltd ('CRISIL AAA/Stable/CRISIL A1+) and Ashok Leyland.
The ratings continue to reflect the extensive experience of the promoters in the auto component industry. These strengths are partially offset by the average financial risk profile and large working capital requirement. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters The three-decade-long experience of the promoter in the auto component industry and his healthy relationships with customers will continue to support the business risk profile. The diversified product offerings and strong procurement network of SFL shall also aid growth.
Improved scale of operations Revenue is estimated at Rs 139.63 crore in fiscal 2022, up from Rs 117.71 crore in fiscal 2021, and will continue to grow, driven by healthy demand from the agricultural equipment segment and faster revival of the auto component industry. Company has recorded a CAGR of over 14% in the three fiscals through March 2022.
Weaknesses: Average financial risk profile High reliance on external debt constrains the financial risk profile. Net worth was Rs 23.45 crore, while gearing was moderately high at 1.85 times, as on March 31, 2022. Debt protection metrics were also muted, as reflected in interest coverage and net cash accrual to adjusted debt ratios of 2.6 times and 0.15 time, respectively, in fiscal 2022.
Large working capital requirement Gross current assets are estimated above 180 days as on March 31, 2022, driven by inventory of over 135 days and receivables of 48 days. However, payables of around 102 days supported the working capital cycle. |
Liquidity: Adequate Expected cash accrual of Rs 8-11 crore per annum will sufficiently cover yearly debt of Rs 4-6 crore over the medium term. Bank limit utilisation averaged around 94% over the 12 months through October 2022. Current ratio was 1.16 times as on March 31, 2022. |
Outlook: Stable CRISIL Ratings believes SFL will continue to benefit from its diversified clientele, comprising leading OEMs in the automotive, gears, tractor, construction equipment and other industries. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Company Incorporated in 1981, SFL undertakes closed-die forging and machining for components, such as spindles, crank shafts, connecting rods, bull gears and crown wheels. Mr Rakesh Mohan Kumar is the managing director. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||
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Criteria Details
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