| Suyog Telematics Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB- / CRISIL A3 '; outlook revised to 'Stable' | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed rationale CRISIL Rating has revised its outlook on the long term bank loan facilities of Suyog Telematics Ltd (STL) to ‘Stable’ from ‘Negative’; while reaffirming its rating at ‘CRISIL BBB-‘. Short term rating has been reaffirmed at ‘CRISIL A3’
Revision in outlook reflect sustained business risk profile backed by improved revenue profile along with sustained operating margins and working capital cycle, despite the stress seen in the telecom services industry. Revenue improved by 16% in fiscal 2020 and likely to further grow by 14-15% in fiscal 2021. Although, receivables increased to 106 days as on March 2020 due to lockdown related disruption, the same is likely to improve and would remain at 80-90 days.
The ratings continue to reflect STL’s established market position, healthy financial risk profile and streamlined repayment mechanism through the presence of an escrow account and 3 month debt service reserve account (DSRA) for term loans. These strengths are partially offset by STL’s moderate scale of operations with geographical concentration, low tenancy ratio of its towers and sizeable capital expenditure (capex) expected over the medium term. |
Key Rating Drivers & Detailed Description Strengths
Debt protection metrics also remain comfortable; interest coverage was 9.4 times in fiscal 2019 and net cash accruals to total debt (NCATD) was 0.85 times. Interest coverage ratio and NCATD is likely to remain comfortable over the medium term.
Scale of operations is modest with operating income of Rs 122.4 crore in fiscal 2020. The operations are concentrated in Mumbai region. While STL has competitive advantage in the city, revenues are exposed to any revision in rental agreement with customers or in long-term lease agreements with MSRDC and MMRDA, which might affect the company’s revenues significantly. Although the company has started diversifying its geographical base with orders from 11 circles currently, benefits from the same are expected to accrue over the medium term and the extent remains to be seen. Hence, scale of operations will continue to be modest and exposed to geographical concentration risk.
Operations are working capital intensive with gross current assets of 203 days as on March 31, 2020 (200 days a year ago), driven by debtors of 106 days (73 days) and large accrued income. Elongation in debtor cycle is largely on account of the overall sluggishness in the telecom sector. Operations may continue to be working capital intensive. Any further elongation in receivables cycle would remain a key rating sensitivity factor. |
Liquidity: Adequate Net cash accrual, expected to be around Rs 45-50 crore per fiscal over the medium should comfortably cover annual term against debt obligation of Rs 12-16 crore. Further, the loan structure provides for an escrow account along with a DSRA equivalent to 3 months of interest and principal repayments to ensure timely servicing of the debt obligations. Capex of Rs 60-70 crore planned over next fiscal is expected to be adequately funded by internal accruals and term debt. . Any significant stretch in receivables or lower-than-expected accruals may exert pressure on the liquidity profile, however, support from promoters, healthy balance sheet enabling further borrowing and presence of escrow and DSRA accounts, is likely to support liquidity. |
Outlook: Stable STL should benefit from its promoter's experience in the telecom tower industry and established relationships with customers and agencies such as MMRDA and MSRDC |
Rating Sensitivity factors Upward factor
Downward factor
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About the company STL, incorporated in 1995 by Mr Shivshankar Lature, is a passive telecommunication infrastructure provider, engaged primarily in the business of installing and commissioning poles, towers and optical fiber cable systems. |
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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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||
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