| Sonam Clock Limited | ||||
| 'CRISIL BBB-/Stable' assigned to Bank Debt | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL BBB-/Stable’ rating to the long term bank facilities of Sonam Clock Limited (SCL).
The ratings reflect the extensive experience of its promoters, comfortable operating efficiency, and above average financial risk profile. These strengths are partially offset by modest scale of operations and working capital intensive operation. |
Key Rating Drivers & Detailed Description Strengths:
SCL has been operating in the clock manufacturing industry for more than three decades. It supplies different types of clocks to reputed and diversified clients in India and abroad (UAE, Iran, Nepal, Sri Lanka, Algeria, etc). The extensive experience of promoters, Mr Jayesh Shah and his family members, have given understanding of the dynamics of the market, and enabled them to establish relationships with suppliers and customers.
SCL has comfortable operating efficiency as reflected in return on capital employed of about 12.4% as on March 31, 2020, driven by healthy profitability and experienced management. The operating margin reported at 11.6% in FY20.
Networth and gearing were comfortable at Rs 27 crore and 0.86 time, respectively, as on March 31, 2020. Gearing is expected to remain below 0.70 time as on March 31, 2021. Debt protection metrics were comfortable too, with interest coverage at 4.04 times and net cash accrual to total debt of 17% in fiscal 2020, and are likely to remain comfortable over the medium term on account of comfortable cash accrual.
Weakness:
Although the turnover of SCL has grown steadily, remains moderate in the intensely competitive clock manufacturing industry, with revenue of around Rs 60 crore in fiscal 2020. The company estimated revenue of Rs 66 crore during 10MFY21, despite COVID 19 induced lockdown backed by healthy domestic and export demand. The revenue is expected to improve supported by improvement in capacity utilization level backed by continuous orders in flow from both domestic and export. The clock industry is fragmented in nature marked by presence of many unorganized players in the industry.
The company has working capital-intensive operations, as indicated by gross current assets (GCAs) of 160-210 days in the four fiscals through 2020. GCAs increased to 203 days as on March 31, 2020, from 180 days a year earlier because of marginal increase in receivables and inventory. GCAs are expected to remain high in range of 180-200 days over the medium term. |
Liquidity: Adequate The cash accrual is expected to be in range of Rs 5-8 crore against term debt obligation of Rs 1-2 crore, over the medium term. Bank lines were moderately utilized at around 71% during the six months ended January 2021. Current ratio was 1.40 time as on March 31, 2020. |
Outlook: Stable CRISIL Ratings believes SCL will continue to benefit from the extensive experience of its promoter and above average financial risk profile. |
Rating Sensitivity factors Upward factor
Downward factor
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About the Company Incorporated in 2001 by Mr Jayesh Shah and family, SCL manufactures wall clocks, table/alarm clocks, digital clocks and clock movements at its facility in Morbi, Gujarat. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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. | |||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||
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