| Spectrum Electrical Industries Limited | ||||||
| 'CRISIL BBB/Positive/CRISIL A3+' assigned to Bank Debt | ||||||
| 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 assigned its ‘CRISIL BBB/Positive/CRISIL A3+’ ratings on the bank loan facility of Spectrum Electrical Industries Limited (SEIL).
The ratings reflect the extensive experience of the promoter, diversified product and service offerings and established relationships with key customers which have led to healthy market position. Financial risk profile also remains healthy marked by comfortable capital structure and debt coverage metrics. These strengths are partially offset by stretched by working capital cycle.
During fiscal 2024, the company saw nearly 30% growth in consolidated revenue, led by strong demand from dealers, particularly towards the year end, and this has led to a healthy operating margin of 13%. Going forward, revenue is expected to grow by 15-20% per fiscal, supported by increased capacity and addition of new customers, along with continued organic growth in orders from existing customers, however, the margins are expected to sustain in between 13-13.5%. |
Analytical Approach CRISIL Ratings has evaluated the consolidated business and financial risk of SEIL and its four subsidiaries.
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:
The company also has its own research and development (R&D) facility and offers need-based services of electroplating, moulding, stamping and tool room. Currently, it has three manufacturing facilities in Maharashtra and one additional facility under construction in Karnataka.
Planned capital expenditure (capex) of Rs 100-120 crore, over fiscals 2025-2026, will be funded through a debt: equity ratio of 70:30. Net debt to EBITDA and interest coverage stood at 1.0 time and 5.1 times, respectively, in fiscal 2024 and is expected to remain in line over the next few years with generation of returns from the capex partially negated by higher debt levels.
Weakness:
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Liquidity: Adequate Expected cash accruals of Rs. 30-40 crores annually in fiscal 2025 and fiscal 2026 will be sufficient to cover yearly debt obligations of Rs 10-15 crore and partly fund the capex. Funds raised in fiscal 2024 have boosted liquidity as reflected in the cash and bank balance of Rs 44 crore as on March 31, 2024. SEIL also has a sanctioned working capital limit of Rs 63 crore, which was utilised at 87% on an average over the 12 months through May 2024. |
Outlook: Positive CRISIL Ratings believes the business risk profile of SEIL will continue to benefit from the extensive experience of the promoters and the strong market position in the electrical equipment industry. Financial risk profile will improve further as the ongoing capex starts generating returns. |
Rating sensitivity factors Upward factors:
Downward factors:
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About the Company The company is engaged in design and manufacture of an extensive range of products under the electrical component domain having different applications and utilities over the last three decades. It has developed the ability to manufacture products across the value chain, right from concept and design to final delivery to the customer’s distribution network. The company has three manufacturing units in Maharashtra at Pune, Nashik and Jalgaon along with an R&D facility with one additional facility under execution in Bangalore. It got listed on the SME platform of the National Stock Exchange in October 2018.
For the first half of fiscal 2025, profit after tax (PAT) stood at Rs 9 crore on revenue of Rs 162 crore, against Rs 7 crore and Rs 137 crore, respectively, in the corresponding period of fiscal 2024. |
Key Financial Indicators
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Status of non cooperation with previous CRA: SEIL has not cooperated with India Ratings and Research Private Limited, which classified it as non-cooperative vide release of dated February 01, 2024. The reason provided by the CRA is the non-furnishing of information for monitoring of ratings. |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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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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