Rating Rationale
December 12, 2024 | Mumbai
Shivalik Bimetal Controls Limited
Ratings reaffirmed at 'CRISIL A/Stable/CRISIL A1'
 
Rating Action
Total Bank Loan Facilities RatedRs.115 Crore
Long Term RatingCRISIL A/Stable (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 ‘CRISIL A/Stable/CRISIL A1’ ratings on the bank loan facilities of Shivalik Bimetal Controls Ltd (SBCL).

 

The ratings continue to reflect the longstanding presence of the promoters of SBCL in the bimetal industry, its leading market position and strong financial risk profile. These strengths are partially offset by moderate scale of operations.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of SBCL and its wholly owned subsidiaries, Shivalik Engineered Products Private Limited (SEPPL; erstwhile Checon Shivalik Contact Solutions Private Limited), Shivalik Bimetal Engineers Pvt Ltd (SBEPL) and Innovative Clad Solutions Private Limited (ICSPL) collectively referred to herein as the Shivalik group. This is because SBEPL and SEPPL are wholly owned subsidiaries of SBCL and ICSPL is a JV with M/s Arcelor Mittal Stainless and Nickel Alloys with holding of 16.01%.
 

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

Key Rating Drivers & Detailed Description

Strengths:

  • Strong market position and track record of management: The promoters have experience of around four decades in the niche and highly specialized bimetal industry. Their extensive experience and the high quality of its products have helped the group develop healthy relationships with customers and ensure sustained revenue growth, despite industry downturns. The group has specialized product profile, including shunt resistors, thermostatic bimetal among others, enabling it to diversify into the electronics, automotive and medical and other industries. This has led to steady profitability of over 23-24% over the past three fiscals ending fiscal 2024, margins slightly declined to 23.6% in fiscal 2024 due to change in sales mix and lower than expected export sales because of slower demand. The group achieved margins of 22% till H1FY25 and estimated to be around 23-24% depending on the product mix and over the medium term expecting to improve with focus on higher value added products but its sustained improvement shall remain monitorable.

 

  • Strong financial risk profile: Financial risk profile is strong marked by low gearing of 0.13 time supported by sizeable networth of over Rs 335 crore as on March 31, 2024 and low dependence on debt, Further, in the absence of any further debt-funded capital expenditure, gearing is likely to improve to below 0.1 time over the medium term. Debt protection metrics are expected to strengthen with interest coverage ratio likely to be 27-28 times in fiscal 2025, compared to 25 times in fiscal 2024, backed by steady profitability and improvement in overall business profile. With no further debt funded capex planned, the financial risk profile is expected to remain strong over the medium term.

 

Weakness:

  • Moderate scale of operations: The company’s topline grew at growth rate of 8% to Rs 449 crore in fiscal 2024 backed by volumetric growth of 19.3% in bimetals segment. However, sales de-grew by 2.9% on a volumetric basis because of the sluggish automotive market and EV market was slower than anticipated. The revenue is expected to increase to Rs 530-540 crore in fiscal 2025 having achieved Rs 258 crore of sales till September 2024 however volumes are estimated to remain flat on-year basis. The group’s scale of operations is expected to remain moderate. The group is anticipating volumetric growth from Q4FY25 onwards as they are receiving high estimates from customers, but the demand remains vulnerable to economic cycles. Though the management is continuously diversifying into new higher value-added products and expanding the clientele, further growth in business and demand from new clients will remain monitorable. Steady order flow leading to significant improvement in the business risk profile will remain a key rating sensitivity factor.

Liquidity: Strong

Bank limit utilisation was low at around 12 percent for the past twelve months ended July 2024.  Cash accruals are expected to be over Rs 85-90 crore which are sufficient against term debt obligation of Rs 4-6 crore over the medium term. In addition, it will act as a cushion to the liquidity of the company and meet incremental working capital requirements. The group had unencumbered FDs of Rs 42 crore as on September 30, 2024 which further aids liquidity. Low gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook: Stable

CRISIL Ratings believes that SBCL will continue to benefit from its established market position and the extensive experience of its promoters.

Rating sensitivity factors

Upward factors:

  • Sustained growth in revenue and steady operating margin leading to higher-than-expected net cash accruals over Rs 100 crore
  • Low dependence on debt leading to sustenance of strong financial risk profile

 

Downward factors:

  • Decline in operating income or operating margins below 17-18%, leading to lower cash accruals
  • Any large, debt-funded capex weakening the financial risk profile or liquidity

About the Group

Incorporated in 1984, SBCL is promoted by Mr S S Sandhu and Mr N S Ghumman. The company manufactures thermostatic bimetal/trimetal strips, components, shunt resistors and clad metals. Its units are in Chambaghat, Himachal Pradesh. It is listed on the Bombay Stock Exchange and National Stock Exchange.

Key Financial Indicators

As on/for the period ended March 31 (Consolidated)

Unit

2024

2023

Operating income

Rs crore

520.61

471.80

Reported profit after tax

Rs crore

84.35

77.39

PAT margins

%

16.18

16.76

Adjusted Debt/Adjusted Networth

Times

0.13

0.22

Interest coverage

Times

24.97

16.52

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 30 NA CRISIL A/Stable
NA Non-Fund Based Limit NA NA NA 40 NA CRISIL A1
NA Working Capital Facility NA NA NA 45 NA CRISIL A/Stable

Annexure – List of entities consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Shivalik Engineered Products Private Limited

Full Consolidation

This is because SBEPL and SEPPL are wholly owned subsidiaries of SBCL.

Shivalik Bimetal Engineers Private Limited

Shivalik Bimetal Controls Limited

Innovative Clad Solutions Private Limited

16.01%

JV with M/s Arcelor Mittal Stainless

and Nickel Alloys with

holding of 16.01%
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 75.0 CRISIL A/Stable   -- 06-10-23 CRISIL A/Stable 31-05-22 CRISIL A/Stable 12-04-21 CRISIL A-/Stable CRISIL A-/Stable
      --   -- 03-08-23 CRISIL A/Stable 25-04-22 CRISIL A-/Stable   -- --
Non-Fund Based Facilities ST 40.0 CRISIL A1   -- 06-10-23 CRISIL A1 31-05-22 CRISIL A1 12-04-21 CRISIL A2+ CRISIL A2+
      --   -- 03-08-23 CRISIL A1 25-04-22 CRISIL A2+   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 16 Indian Bank CRISIL A/Stable
Cash Credit 14 Indian Bank CRISIL A/Stable
Non-Fund Based Limit 20 Indian Bank CRISIL A1
Non-Fund Based Limit 20 Indian Bank CRISIL A1
Working Capital Facility 35 DBS Bank India Limited CRISIL A/Stable
Working Capital Facility 10 DBS Bank India Limited CRISIL A/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
CRISILs Criteria for Consolidation

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