| Thermopads Private Limited | ||||||
| Short-term rating upgraded to 'CRISIL A1'; long-term rating reaffirmed | ||||||
| Rating Action | ||||||
| ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
CRISIL Ratings has reaffirmed its rating on the long term bank loan facilities of Thermopads Private Limited (TPL; part of the Thermo group) at ‘CRISIL A-. The rating on the short term bank facilities has been upgraded to ‘CRISIL A1’ from ‘CRISIL A2+’.
Operations have reverted to normalcy and revenues have grown by around 18% in fiscal 2021. The improvement is driven by new product launches and entry into new geographies. CRISIL estimates revenue growth of 10-12% and sustenance of operating margins at 14% over the medium term. The growth momentum will be supported through capital expenditure undertaken.
On account of healthy operating performance, the financial risk profile has strengthened further, indicated by improved leverage to 0.2 times from 0.3 times. Debt protection metrics also improved, as seen in interest coverage ratio improving to around 7 times in fiscal 2021 from 6 times in fiscal 2020 and NCATD improving to around 0.9 times in fiscal 2021 from 0.6 times in fiscal 2020. Liquidity too has witnessed significant improvement, more pronounced in the standalone business (cash and cash equivalents at Rs 114 crore as on March 31, 2021 compared with Rs 94 crore as on March 31, 2020). Maintenance of ample liquidity and sustained operating margin will be key monitorables. Also Controlled working capital management with limited reliance on external debt, and the absence of any major capital expenditure (capex), will ensure a leverage of less than 0.3 time over the medium term.
The ratings continue to reflect the Thermo group’s established presence in the industrial heaters and cables industry supported by its promoters' extensive industry experience and established relationships with customers. The ratings also factor in the group's healthy financial risk profile marked by comfortable networth, low gearing, and robust debt protection metrics. These strengths are partially offset by large working capital requirement, and susceptibility of profitability to volatility in raw material prices. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of Thermopads Private Limited (TPL) and its associate companies Thermopad Systems Limited (TSL), and Thermo Cables Limited (TCL). This is because all the entities, together referred to as the Thermo group, have common promoters, operational linkages, and fungible cash flows. The consolidation is also underpinned by the Thermo Group management’s committed stance that the stronger entities in the group shall extend need based timely support across the other entities in the group.
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 Thermo group’s promoters, Mr. N K Ghurka, Ms. Uma Ghurkha, and Mr. Chetan Ghurka, are technocrats with combined experience of over 3 decades in the cable and surface heating products industry. The promoters’ strong technical background and extensive experience have enabled the group to establish relationships with several esteemed customers.
The group's financial risk profile is marked by comfortable net worth, low gearing and robust debt protection metrics. The Group's net worth is about Rs.358 Crores as on March 31, 2021. Low gearing of 0.21 times is expected to sustain given no major debt funded capex plans. NCATD and Interest coverage are 0.88 times and 7.3 times for FY21.
Weakness:
The profitability of the Thermo Group is vulnerable to the fluctuations in prices of raw materials, mainly metal-based products such as copper, aluminum, steel, and nickel. The prices of these base metals have fluctuated significantly in the past, leading to an increase in cost of raw materials.
Thermo group has large working capital requirements, as indicated by its large GCAs of close to 200 days as on March 31, 2021 .The GCA days have been at similar levels in the past. The high GCA days emanates from the group's high receivables cycle of close to 120 days and inventory levels close to 70 days. |
Liquidity: Strong Thermo Group has ample liquidity driven by expected cash accruals of more than Rs.60 cr per annum in FY22 and FY23 and cash and cash equivalents of more than Rs.114 cr as on March 31, 2021. Thermo Group also has access to fund based limits of were utilized at close to of 85% on an average over the 12 months ended March 2021. The group has nil long term repayment obligations in FY22 and FY23. CRISIL believes the company has sufficient accruals and cash and cash equivalents to meet its capex requirements. With a gearing of 0.21 times as of March 31, 2021, the group has sufficient gearing headroom, to raise additional debt for its capex. |
Outlook: Stable CRISIL Ratings believes the Thermo group will continue to benefit over the medium term from its promoters' extensive industry experience and established customer relationships. |
Rating Sensitivity Factors Upward factor
Downward factor
|
About the Group TPL was set up as a partnership firm in 1979 by Mr. Nand Kishore Ghurka and his family members, and was reconstituted as a private limited company in 1991. It manufactures industrial heaters such as heat tracers and heating cables.
TSL, based in Hyderabad, was set up in 2005 by Mr. Nand Kishore Ghurka and his family members. The company undertakes engineering, procurement, and construction projects for the power, and oil and refinery industries.
TCL was set up in 1990 by Mr. Nand Kishore Ghurka and his family members. The company manufactures a variety of cables including instrument signal cables, power and control cables, flame-retardant low-smoke cables, and special cables for application in high-temperature zones. The company has manufacturing facilities in Jeedimetla and Jadcherla in Telangana. |
Key Financial Indicators - Consolidated
*Provisional |
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)
|
Annexure – List of Entities Consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
Criteria Details
|