| Sintercom India Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL BB+/Negative/CRISIL A4+' ratings on the bank facilities of Sintercom India Limited (SIL).
The ratings continue to reflect the company’s established position in the sintering technology segment, increasing product basket, experience of the promoters and comfortable capital structure. These strengths are partially offset by large working capital requirement and segment and client concentration in revenue. |
Key Rating Drivers & Detailed Description Strengths:
The company has been manufacturing automobile (auto) components through sintering technology for more than a decade and is among the few organized manufacturers in the domestic market. It caters to large auto players in the passenger car and two-wheeler segments. Furthermore, the experience of the promoters will help increase presence in the non-passenger vehicle segment.
The company benefits from its tie-up with the Miba Sinter group, which is among the world leaders in sintering technology. It has invested more than Rs 100 crore in setting up its advanced technology plant. Over the years, it has increased its products to 60, with another 20 under various stages of development. The advantages of using sintered products and the increasing product basket should help scale up the business over the medium term.
Adjusted net-worth was comfortable at Rs 78.81 crore as on March 31, 2021 post addition of Rs. 22 crores of equity from the Miba Group (Rs. 61.69 crores networth in fiscal 2020). Gearing was comfortable at less than 0.27 time and is expected to remain stable in the absence of debt-funded capital expenditure (capex).
Weaknesses:
Gross current assets are around 390 days as on March 31, 2021, driven by receivables of 164 days and inventory of 193 days. Inventory is high as at sintering stage a certain minimum number of components need to be manufactured in one batch. As order volumes increase, these inventory levels are expected to come down. Also, as the company is single source supplier for 80% of its programs, hence some components are kept for emergency needs of the customers. Efficient management of working capital remains a key monitorable.
Revenue comes from the auto industry. The top five customers account for more than 80% of overall turnover. As a result, the company is susceptible to slowdowns in the end-user industry or weakening in the performance of key clients. The company is planning to diversify into non-auto sectors, however, demand from these sectors remains to be seen. |
Liquidity: Stretched Cash accruals are expected to be around Rs. 2.7 crore in fiscal 2022 which is insufficient against debt repayment obligation of Rs. 6.4 crores. Repayments are to be supported by equity infusion of Rs. 22 crores already made by the promoters Miba group. Cash accruals are however expected to remain in the range of Rs 6.3-7.9 crores pa which are sufficient against term debt obligation of Rs 1.13-3.8 crores over the medium term. Bank limit utilization is moderate at around 72 percent for the past twelve months ended January 2022.
Current ratio was comfortable at 1.51 times on March 31, 2021. The promoters are likely to extend support in the form of equity and unsecured loans to meet its working capital requirements and repayment obligations. High cash and bank balance of around Rs. 7.57 crore as on March 31, 2021. Low gearing and comfortable net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business. |
Outlook: Negative CRISIL Ratings believes the business risk profile of SIL will remain constrained given significant deterioration in operating performance amidst subdued demand scenario. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company SIL (previously, Maxtech Sintered Products Pvt Ltd), set up in 2007, manufactures auto components using the sintering (powder metal) technology. The company was initially set up as a joint venture between BRN Industries Ltd (BIL; promoted by Mr J Raval and Mr H Banga) and Maxtech Manufacturing Inc (MMI). In June 2010, BIL acquired the entire stake of MMI in SIL. In February 2011, the MIBA Sinter group bought significant stake in the company, which was renamed Sintercom India Pvt Ltd. The manufacturing plant is in Malval, Maharashtra. In February 2018, the company came out with an initial public offering and got listed on the SME (small and medium enterprises) platform of the National Stock Exchange. |
Key Financial Indicators
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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)
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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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