Rating Rationale
May 31, 2022 | Mumbai
Shivalik Bimetal Controls Limited
Ratings upgraded to 'CRISIL A/Stable/CRISIL A1'
 
Rating Action
Total Bank Loan Facilities RatedRs.71 Crore
Long Term RatingCRISIL A/Stable (Upgraded from 'CRISIL A-/Stable')
Short Term RatingCRISIL A1 (Upgraded from 'CRISIL A2+')
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed rationale

CRISIL Ratings has upgraded its ratings on the bank facilities of Shivalik Bimetal Controls Limited (SBCL) to ‘CRISIL A/Stable/CRISIL A1’ from ‘CRISIL A-/Stable/CRISIL A2+’.

 

The ratings upgrade factors in the improvement in the business risk profile of the company. Revenue was Rs 234.7 crore for April-December 2021 as compared to Rs 203.7 crore in fiscal 2021. Accordingly, turnover growth in fiscal 2022 is estimated to be healthy over fiscal 2021. Furthermore, operating margin in the nine months of fiscal 2022 increased to ~23.1% as compared to 19.4% in fiscal 2021.

 

The revision in ratings also takes into account CRISIL Ratings’ belief that the company’s financial risk profile will remain healthy over the medium term. Gearing and total outside liabilities to tangible networth ratios (TOLTNW) were 0.21 time and 0.58 time, respectively, as on March 31, 2021 and are estimated to have improved in fiscal 2022. Debt protection metrics were healthy with interest coverage and net cash accrual to total debt (NCATD) ratios of 28 times and 1.0 time, respectively, and are estimated at similar levels in fiscal 2022.

 

Liquidity remains comfortable with moderate bank limit utilisation of ~34%, on average, in the 12 months ended March 2022. Net cash accrual is estimated to be over Rs 57 crore for fiscal 2022, which is sufficient against debt repayments.

 

The ratings continue to reflect the longstanding presence of the promoters of SBCL in the bimetal industry, its leading market position and comfortable financial risk profile. These strengths are partially offset by working capital-intensive operations and volatility in input prices and foreign exchange (forex) rates.

Analytical approach

CRISIL Ratings has combined the business and financial risk profiles of SBCL and its wholly-owned subsidiaries, Checon Shivalik Contact Solutions Pvt Ltd (CSCSPL) and Shivalik Bimetal Engineers Pvt Ltd (SBEPL), collectively referred to herein as the Shivalik group. This is because SBCL announced plans to acquire 50% stake from its joint venture partner in CSCSPL and 55% stake in its associate company, SBEPL.

 

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:

  • Strong market position in the niche linear bimetals segment: Being one of the few manufacturers of bimetal parts and shunt resistors in India, SBCL faces limited competition. The company caters to a broad spectrum of applications, including switchgears, energy meters, and electrical applications, and automotive and electronic devices. Thus, growth remains correlated with the performance of the electrical, electronics, and automotive industries. Turnover growth in fiscal 2022 is estimated to be healthy as revenue of Rs 234.7 crore was registered in nine months as against Rs 203.7 crore in fiscal 2021.

 

  • Strong track record of key management: Presence of over three decades in the niche and highly specialised bimetal industry, has enabled the promoters to ensure sustained revenue growth, despite industry downturns.
     
  • Comfortable financial risk profile and adequate liquidity: Networth was large at Rs 137.5 crore, as on March 31, 2021 and at Rs 161.0 crore, as on September 30, 2021, driven by steady accretion to reserve while gearing was healthy at 0.21 time as on March 31, 2021 and is estimated to have improved further in fiscal 2022. Debt protection metrics were robust, with interest coverage and net cash accrual to total debt ratios of 28.15 times and 1.0 time, respectively, for fiscal 2021 and are estimated to have remained at similar level in fiscal 2022.

 

Weaknesses:

  • Susceptibility to volatility in raw material prices and forex rates: With metals such as nickel and copper forming around 50% of overall cost, operating margin remains susceptible to volatility in commodity prices. Though metal prices may continue to fluctuate, this risk is mitigated by order-backed processing undertaken by SBCL on highly customised products.

 

  • Working capital-intensive operations: Gross current assets stood at 239 days as on March 31, 2021, because of sizeable inventory and large receivables and is expected to remain along similar lines going forward. Raw materials inventory of around 120 days is maintained as procurement is imported and includes a variety of alloys.

Liquidity: Strong

Bank limits of Rs 50 crore were utilised at a modest 33.9% for the 12 months ended March 31, 2022. Cash accrual is expected to be sufficient against term debt obligations and the surplus will support liquidity. Current ratio is estimated to have remained healthy at over 1 time as on March 31, 2022 (1.99 times a year earlier). Low gearing and moderate networth support financial flexibility.

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 (by 40%) and steady operating margin leading to higher accruals
  • Better working capital management

 

Downward factors

  • Profitability falls below 19% or stretch in working capital cycle
  • Large debt-funded capital expenditure, weakening the capital structure

About the company

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

 

2021

2020

Operating income

Rs crore

203.72

187.22

Reported profit after tax (PAT)

Rs crore

24.15

12.76

PAT margin

%

11.80

6.77

Adjusted debt/Adjusted networth

Times

0.21

0.22

Interest coverage

Times

28.15

8.61

 

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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of instrument(s)

ISIN

Name of instrument

Date of allotment

Coupon

rate (%)

Maturity

date

Issue size

(Rs crore)

Complexity

levels

Rating assigned

with outlook

NA

Cash Credit

NA

NA

NA

16

NA

CRISIL A/Stable

NA

Letter of credit & Bank Guarantee

NA

NA

NA

20

NA

CRISIL A1

NA

Working Capital Facility

NA

NA

NA

35

NA

CRISIL A/Stable

 

Annexure – List of entities consolidated

Names of entities consolidated

Extent of consolidation

Rationale for consolidation

Shivalik Bimetal Controls Ltd

Full

SBCL announced plans to acquire 50% stake from its joint venture partner in CSCSPL and 55% stake in its associate company, SBEPL thereby making them wholly-owned subsidiaries.

Checon Shivalik Contact Solutions Pvt Ltd

Shivalik Bimetal Engineers Pvt Ltd

 

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 51.0 CRISIL A/Stable 25-04-22 CRISIL A-/Stable 12-04-21 CRISIL A-/Stable 16-04-20 CRISIL A-/Stable 28-03-19 CRISIL A-/Stable --
      --   --   --   -- 14-03-19 CRISIL A-/Stable --
Non-Fund Based Facilities ST 20.0 CRISIL A1 25-04-22 CRISIL A2+ 12-04-21 CRISIL A2+ 16-04-20 CRISIL A2+ 28-03-19 CRISIL A2+ --
      --   --   --   -- 14-03-19 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
Letter of credit & Bank Guarantee 20 Indian Bank CRISIL A1
Working Capital Facility 35 DBS Bank India Limited CRISIL A/Stable
This Annexure has been updated on 31-May-22 in line with the lender-wise facility details as on 13-Dec-21 received from the rated entity.
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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