Rating Rationale
March 27, 2025 | Mumbai
Swastik Wire Product
Rating downgraded to 'Crisil BBB-/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.25 Crore
Long Term RatingCrisil BBB-/Stable (Downgraded from 'Crisil BBB/Stable')
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 downgraded its rating on the long term bank facilities of Swastik Wire Product (SWP) to ‘Crisil BBB-/Stable’ from ‘Crisil BBB/Stable’,

 

The downgrade in rating reflects the steep fall in revenue during fiscal 2024 to ~Rs 127 crore (~Rs 180 crore during fiscal 2023) owing to gradual shift from copper to aluminum wires, amidst changing demand. The fall in revenue was impacted by both lower volumes and realisations. Resultantly, revenue and profitability stood lower than Crisil Rating’s earlier expectations as well.  While the volumes are expected to improve in fiscal 2025, the overall business performance will continue to remain moderate and lower than Crisil Rating’s earlier expectation; revenue is likely to be at Rs 135-140 crore as against Crisil Rating’s earlier expectation of Rs 180-190 crore. Lower performance and sizeable withdrawals by partners, estimated at Rs 7-8 crore in fiscal 2024 and 2025 collectively, also impacted the net cash accruals, which turned negative in fiscal 2024 and remain low at Rs 1-2 crore in fiscal 2025. Going forward, significant and sustained improvement in revenue leading to improved net cash accruals will remain a key monitorable.

 

The rating continues to factor in firm’s comfortable financial risk profile owing to debt free capital structure. While capital withdrawal impacted the accretion to reserves and hence the networth, it stood comfortable for the business requirement, estimated at Rs 40-42 crore as of Mar 31, 2025. Absence of debt aided the debt protection indicators too. Liquidity profile moderates on account of lower net cash accruals, however, remains aided by no repayments and largely un-utilized bank lines of Rs 15 crore.

 

The rating continues to reflect the extensive experience of the partners with healthy relationships with suppliers and customers and comfortable financial risk profile. These strengths are partially offset by modest scale of operations and regular capital withdrawal leading to negative net cash accrual.

Analytical Approach

Crisil Ratings has evaluated the standalone business and financial risk profiles of SWP.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the partners with healthy relationships with suppliers and customers: The partners’ experience of more than four decades in the winding wires business, understanding of local market dynamics and healthy relationships with suppliers and customers will continue to support the business. SWP has longstanding relationships with its customers, which include established players in electronic equipment and appliances segment. All these factors have aided steady growth in revenue over the past years. However, from fiscal 2024 owing to shift from copper to aluminum wires the overall revenue has come down to scale of Rs 130-135 crore in fiscal 2025 from Rs 175-180 crore in fiscal 2023 (recorded revenue in fiscal 2024 was Rs 127 crore). Going forward, revival of operations to historical levels while sustaining operating margins shall remain the key sensitivity factor.

 

  • Comfortable financial risk profile: Capital structure is expected to remain comfortable, as reflected in networth and total outside liabilities to tangible networth ratio of Rs 40-42 crore and 0.05 time, respectively, as on March 31, 2025, resulting from minimal reliance on external debt. Debt protection metrics were robust, as indicated by interest coverage and net cash accrual to adjusted debt ratios of more than 10 times and 1 time, respectively, in fiscal 2025 because of low interest expenses on account of no term loans. Despite regular drawings the financial risk profile is expected to remain healthy owing to minimum utilisation of working capital limits and no term loan in the business. The capital structure is expected to remain comfortable in fiscals 2026 subject to no withdrawals from capital and limited dependence on external debt. With no major debt-funded capital expenditure (capex) plans over the medium term, the overall financial risk profile will remain comfortable.

 

Weaknesses:

  • Modest scale of operations: Business risk profile of the firm is marked by sales of ~Rs. 127 crores in FY24 which is expected to remain at Rs 135-140 crore in fiscal 2025 with recorded revenue of Rs 117 crore till February 2025. Due to disturbance in the market and customers shift from copper to aluminum wires, amidst changing demand as a cheap substitute for copper, the revenue is expected to moderate in the coming fiscals from 2026 as well. With an expected recovery in industrial demand along with stabilization of operations, Crisil Ratings believes the revenue profile of the firm will improve in fiscal 2026, however, its significant and sustained improvement will remain a key monitorable.

 

  • Regular capital withdrawal leading to negative net cash accrual: Over the past three fiscals through FY24, the partners have collectively withdrawn around Rs 11.2 crore of funds in last 3 fiscals from the business, thereby impacting the networth and liquidity. Furthermore, the net cash accruals also turned negative during fiscal 2024. While liquidity remains supported by no term debt repayments, improvement in net cash accruals, driven by reduced withdrawals by the partners, will remain a key rating sensitivity factor.

Liquidity: Adequate

Bank utilization is nil at for the past twelve months ended on December 24. Cash accruals are expected to be over Rs 0.9-1 crore against nil term debt obligations over the medium term. In addition, it will act as a cushion to the liquidity of the firm. Current ratios are expected to remain healthy at more than 10 times on March 31, 2025.

Outlook: Stable

Crisil Ratings believes SWP will continue to benefit from its established market position and the extensive experience of the partners.

Rating sensitivity factors

Upward factors:

  • Growth in revenue supported by volume growth, and steady operating margin leading to net cash accruals at historical levels of more than Rs 5 crore.
  • Lower capital withdrawal, leading to positive net cash accrual above Rs 5 crore.
     

Downward factors:

  • Decline of 8-10% in revenue or low operating profitability leading to lower-than-expected accruals
  • Capital withdrawal in the form of dividend, leading to negative net cash accrual

About the Company

SWP was set up in 2007 as a partnership by Mr. Sameer Agarwal, Mr. Arun Kumar Jain, Mr. Rameshwar Dayal Jain and Mr. Yogender Kumar Jain. Based in Baddi, Himachal Pradesh, the firm manufactures various types of copper winding wires. Its manufacturing unit has capacity of 4,000 TPA.

Key Financial Indicators

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

127.22

182.60

Reported profit after tax

Rs crore

4.00

6.57

PAT margins

%

3.15

3.60

Adjusted Debt/Adjusted Net worth

Times

0.00

0.34

Interest coverage

Times

74.18

91.28

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs.Crore) Complexity Levels Rating Outstanding with Outlook
NA Cash Credit NA NA NA 15.00 NA Crisil BBB-/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 10.00 NA Crisil BBB-/Stable
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 25.0 Crisil BBB-/Stable   -- 09-01-24 Crisil BBB/Stable   -- 28-10-22 Crisil BBB/Stable Crisil BBB/Stable
      --   --   --   -- 31-03-22 Crisil BB+ /Stable(Issuer Not Cooperating)* --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 15 Axis Bank Limited Crisil BBB-/Stable
Proposed Long Term Bank Loan Facility 10 Not Applicable Crisil BBB-/Stable
Criteria Details
Links to related criteria
Basics of Ratings (including default recognition, assessing information adequacy)
Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)

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