| Suyog Telematics Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB/Stable/CRISIL A3+'; Rated amount enhanced for 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 reaffirmed its ‘CRISIL BBB/Stable/CRISIL A3+’ rating on the bank loan facilities of Suyog Telematics Limited (STL).
Company’s revenue has grown at compounded annual growth rate of 13% over past 3 years through fiscal 2022 with operating margin at around 58% in fiscal 2022. Company has already reported revenue of around Rs 115 crore at an operating margin of around 65% during 9 months of fiscal 2023. Installation of new towers and healthy orderbook providing tenancy visibility will result in revenue growth over the medium term. Further, debtors more than 6 months being less than 1% of networth limits the debtors’ risk. While company is expected to undertake significant capex for new towers, financial profile particularly liquidity will continue to remain comfortable on account of limited reliance on external debt.
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 and large capital requirement expected over the medium term.
CRISIL Ratings had upgraded its ratings on the bank loan facilities of STL to ‘CRISIL BBB/Stable/CRISIL A3+’ from ‘CRISIL BBB-/Stable/CRISIL A3’ on February 22, 2023. |
Key Rating Drivers & Detailed Description Strengths: Established regional market position: STL was incorporated in 1995 by Mr. Shivshankar Lature, which builds, owns and operates telecommunication Poles, Towers (particularly Roof-top towers), Optical fiber cables (OFC) systems and related assets and provides these passive infrastructure assets on a shared basis to wireless and other communications service providers. It is registered as Infrastructure Provider Category-I (IP-I) with DoT (Department of Telecommunications). Backed by strong relations with various telcos and efficient operations, STL has diversified its operating areas beyond its conventional strong hold of Mumbai circle. With introduction of 5G network, the telcos are expected to spread their network significantly across the hinterlands of India. Revenue achieved till 31st Dec 2022 is around Rs 115 crore and revenue is expected to reach around Rs 170-180 crore in fiscal 2023
Above-average financial risk profile: Despite planned capex of Rs 50-60 crore over the next fiscal, financial risk profile is expected to remain healthy. Networth was Rs 188.3 crores as on March 31st 2022 and leverage level is moderate as reflected in total outside liability to adjusted networth (TOLANW) ratio of 0.92 times as on March 31, 2022. While the capex is expected to be partially funded by debt; TOLANW is likely to remain at less than 1 times over the medium term owing to moderate accruals. Debt protection metrics also remain comfortable; interest coverage was 6.66 times in fiscal 2022 and net cash accruals to total debt (NCATD) was 1.12 times. Interest coverage ratio and NCATD is likely to remain comfortable in the same range over the medium term.
Weaknesses: Moderate scale of operations and geographical presence: Although on improving trend, scale of operations continues to remain moderate with operating income of Rs 155.72 crore in fiscal 2022.Although the company has started diversifying its geographical base with orders from 28 circles compared to 12 circles previously, benefits from the same are expected to accrue over the medium term and the extent remains to be seen. Company generates around 60-65% revenues come from Mumbai and Maharashtra, which exposed company to any revision in rental agreement with customers or in long-term lease agreements with government agencies.
Large capital requirement: The telecom tower industry is capital intensive, though capex is largely built to order. The company is expected to increase its towers with launch of 5G in near term. The company has also added towers in to diversify its geography. Annual capex is projected at over Rs 60 crore for the medium term. While, working capital cycle has improved, with concentration in customer base due to consolidation and exits in industry, receivables can be impacted, thereby resulting in high working capital requirement. Sustenance of improved working capital cycle to remain monitorable. |
Liquidity: Adequate NCA likely to provide 5-6 times cushion to repayment obligations over the medium term. Net cash accrual, expected to be around Rs 70-75 crore per fiscal over the medium term and should comfortably cover annual term against debt obligation of Rs 11-15 crore. Any delay in payment from the counter parties can put pressure on the liquidity profile. Absence of any working capital limit constrains liquidity profile. However, apart from unencumbered cash of Rs 1.1 crore as on Dec 2022, company also maintains a DSRA equivalent to 1 quarter in form of FDs. The lease rentals come in a designated escrow account from where the lenders take their dues and the balance is available for the company’s use. Capex of Rs 50-60 crore planned over next fiscal is expected to be adequately funded by internal accruals and term debt. Liquidity will remain adequate despite debt funded capex over medium term. |
Outlook: Stable STL should benefit from its promoter's experience in the telecom tower industry and established relationships with customers and agencies. |
Rating Sensitivity factors Upward factors:
Downward factors:
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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 fibre cable systems. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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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This Annexure has been updated on 20-Mar-23 in line with the lender-wise facility details as on 06-Mar-23 received from the rated entity.
Criteria Details
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