| Synergy Green Industries Limited | ||||||
| Ratings reaffirmed at 'F A-/Stable/CRISIL BBB-/Stable/CRISIL A3' | ||||||
| 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-/FA-/Stable/CRISIL A3' ratings on the bank facilities and fixed deposits of Synergy Green Industries Limited (Synergy).
The ratings continue to reflect the extensive experience of the promoters of Synergy in manufacturing iron castings, their funding support and the company’s established clientele and moderate financial risk profile. These strengths are partially offset by working capital intensive operations, and susceptibility to volatility in raw material prices. |
Analytical Approach CRISIL Ratings has treated preference shares worth Rs 10.71 crore as on March 31, 2021, as neither debt nor equity because the shares carry a low interest rate, and will likely be retained in the business over the medium term.
Unsecured loans of Rs 13.6 crore as on March 31, 2021 from the promoters are treated as debt as they are not expected to remain in the business over the medium term. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters: The promoters’ experience of more than a decade in the industry, their funding support and healthy relationships with customers should continue to support the business. Synergy was initially established as a greenfield project, but the promoters were able to quickly ramp-up operations. Further, the promoters have extended their fund support in the form of preference shares and deposits.
Established clientele leading to healthy growth in revenue: Company’s revenue has grown at healthy compound annual growth rate of over 20% in the three years through fiscal 2022, on account of increase in demand from established clientele, including Vestas Wind Technologies India Pvt Ltd, Gamesa Wind Turbines Pvt Ltd, Terex India Pvt Ltd, and ZF Wind Power, among others. There have been continuous addition of customers. Furthermore, unexecuted order book of more than Rs 300 crore, expected capacity enhancements in the wind power segment, and product development in the wind castings division with shifting of capacity from 2MW iron casting capacity to 4 MW iron casting capacity, which are higher value products should improve revenue significantly over the medium term.
Weaknesses: Susceptibility to fluctuations in raw material prices: Operating margin remains exposed to adverse fluctuations in input prices. Raw materials account for 50-55% of sales, and the prices of key raw materials, such as cold-rolled close annealed scrap, mild steel scrap, pig iron, and resins are volatile. The company has been able to pass on the price rise to customers with a time lag of 1-2 quarters. Consequently, when margin dipped during Q2 and Q3 of fiscal 2022, same improved in Q4. Operating margin has been at 8.5-12.4% in the four fiscals through 2021.
Large working capital requirement: The working capital cycle may remain stretched over the medium term and will be closely monitored. Gross current assets (GCAs) were sizeable at 139 days as on March 31, 2021, driven by debtors and inventory of 85 and 45 days, respectively. Significant working capital requirements is funded through stretched creditors. |
Liquidity: Adequate Expected cash accrual of Rs 15 crore per annum over the medium term should comfortably cover yearly debt obligation of Rs 9.0-9.5 crore and support liquidity. Bank limit utilization averaged 62% in the 12 months through January 2022. Capital expenditure of Rs 30-32 crore in near term is expected to be funded through debt of ~Rs 15 crore and balance through internal accruals. Liquidity is also supported by promoters (including relatives) in the form of unsecured loans or deposits and preference shares, which stood at Rs 22 crore as on March 31, 2022. |
Outlook: Stable CRISIL Ratings believes Synergy will continue to benefit from the extensive experience of its promoters and their funding support. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company Incorporated in October 2010, and based in Kolhapur, Maharashtra, Synergy is an associate concern of SB Reshellers Pvt Ltd, which was set up in 1978. It primarily manufactures iron castings for wind turbines. Commercial production began in June 2012. Mr Sachin Shirgaokar, Mr Sohan Shirgaokar, and Mr V Srinivas Reddy manage the operations. |
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 | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Cash Credit | 25 | IndusInd Bank Limited | CRISIL BBB-/Stable |
| Cash Credit | 25 | The Saraswat Co-Operative Bank Limited | CRISIL BBB-/Stable |
| Proposed Working Capital Facility | 5.13 | Not Applicable | CRISIL A3 |
| Term Loan | 20 | IndusInd Bank Limited | CRISIL BBB-/Stable |
| Term Loan | 25.93 | The Saraswat Co-Operative Bank Limited | CRISIL BBB-/Stable |
This Annexure has been updated on 13-Mar-23 in line with the lender-wise facility details as on 22-Feb-23 received from the rated entity.
Criteria Details
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