| Technocraft Industries India Limited | ||||||
| Rating outlook revised to 'Stable'; Rating reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the long-term bank facilities of Technocraft Industries India Limited (TIIL) to ‘Stable’ from ‘Positive’ and reaffirmed the rating at ‘CRISIL A+’. The rating on the short-term bank facilities has been reaffirmed at ‘CRISIL A1+’.
The revision in outlook takes into account the lower-than-expected improvement in business risk profile as indicated by muted revenue growth in past few years and operating margin remaining range bound at around 16%. For fiscal 2021, revenue is estimated to have declined 7-9% from the previous year largely due to Covid-19 induced disruptions, though profitability is estimated to have remained stable. Revenue growth and operating margin are expected to mirror past trend over the medium term.
The financial risk profile continues to be strong with estimated net debt [gross borrowing less cash and cash equivalents (including investments)] below Rs 100 crore as on March 31, 2021 as compared to Rs 293 crore a year earlier. The improvement in net debt is largely due to lower working capital borrowing. Additionally, company has prepaid term loan amounting to Rs 50 crore in the first quarter of fiscal 2022 thereby further improving the net debt position. While working capital borrowings are expected to increase again, depending on business needs, the overall net debt position is likely to improve with no major capital expenditure (capex) plans leading to healthy free cash flow generation. Any significant debt-funded capex, increased working capital intensity or outflow of cash through buyback/dividend resulting in deterioration of the cash position would be key rating sensitivity.
The ratings continue to reflect the strong financial risk profile of TIIL, diverse product profile, established market position in the drum closure industry and increasing market share in the scaffolding industry. These strengths are partially offset by weaker operating performance of the yarn and fabric division. |
Analytical Approach CRISIL Ratings has consolidated the business and financial risk profiles of TIIL, its domestic and foreign subsidiaries, step-down subsidiaries, limited liability partnership and joint ventures because of strong financial and operational linkages between them.
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 scaffolding segment comprises scaffolding, formwork and tower business with 75-80% of revenue accruing from the overseas markets. The company has also started manufacturing sophisticated engineered formwork systems for building, construction and infrastructure projects. These products are supplied to industries such as oil & gas, power, refineries, petrochemical, infrastructure and commercial construction.
Weaknesses:
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Liquidity: Strong TIIL enjoys healthy liquidity, driven by expected cash accrual of over Rs 180 crore in fiscal 2022 and cash and cash equivalents (including investments) of around Rs 350 crore as on March 31, 2021. Residual term debt obligation is around Rs 15 crore from June 2021 till March 2022. Average fund-based working capital utilisation remained moderate at 50% for the 12 months through March 2021. Cash accrual, cash and cash equivalents and unutilised bank lines should meet repayment obligations as well as incremental working capital requirement in the near term. |
Outlook: Stable CRISIL Ratings believes TIIL will continue to benefit from its strong overall financial risk profile, established market position in the drum closure segment and growing scaffolding division. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company TIIL was set up as a partnership firm in 1972 and was reconstituted as a private limited company in 1991. It has three major manufacturing divisions: drum closures, scaffoldings, and garments and cotton yarn. It is the leading drum closure manufacturer in the international market, with a sizeable market share and annual capacity of 55 million sets in India and 15 million sets in China. It has capacity of 40,000 metric tonne (MT) and 25,000 MT in India and China (shifted to India recently), respectively, for scaffoldings, and around 60,000 spindles in its yarn division. TIIL has several marketing subsidiaries in the US, Europe, and Australia. |
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)
$ Fully Interchangeable with Working Capital Demand Loan, Pre shipment/Post Shipment finance, Letter of credit, Cash Credit. * Fully Interchangeable with Working Capital Demand Loan, Pre shipment/Post Shipment finance, Letter of credit, Buyers Credit, Overdraft and Cash Credit @ Fully Interchangeable with Pre shipment/Post Shipment finance, Letter of credit, Bank Guarantee (Financial/Performance), Cash Credit # Fully Interchangeable with Working Capital Demand Loan, Pre shipment/Post Shipment finance, Letter of credit, Buyers Credit, Cash Credit % Fully Interchangeable with Export Packing Credit, Pre shipment/Post Shipment finance, Foreign Bill Purchase /Discounting /Negotiation; Interchangeable with Letter of credit to the extent of Rs. 20 crores; Interchangeable with Bank Guarantee (Financial/Performance) to the extent of Rs. 15 crores. |
Annexure – List of entities consolidated
$ incorporated on October 15, 2020 *sold w.e.f. November 26, 2019 ^closed w.e.f December 31, 2019 # divested w.e.f. January 01, 2020 |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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