Key Rating Drivers & Detailed Description

Strengths:

Experienced promoter: Ucal was established in 1985 by Carburettors Ltd, pioneers in India in manufacturing carburettor and mechanical fuel pumps. In 1987, Ucal entered into a joint venture with Mikuni Corporation of Japan (Mikuni Corporation), an internationally renowned company for fuel management system and products. In 2008, Carburettors Ltd, the Indian promoter of Ucal, acquired the equity stake held by co-promoter, Mikuni Corporation. However, Ucal has absorbed extensive technical know-how provided by Mikuni Corporation. Mr K. Jayakar (Chairman, Managing Director), an MBA in Finance from Duke University, USA, manages the operations..

Established presence in carburettor business with long-standing relationship with customers: While carburettors have largely been replaced by fuel injection systems over the years, they still have a market in the affordable <125 cc bike segment. Ucal, a strong player, manufactures both Bharat Stage(BS) VI compliant electronic carburettor as well as traditional mechanical carburettor. The company has long-standing presence with coveted customers such as Bajaj Auto Ltd (Bajaj Auto; CRISIL AAA/Stable/A1+) and TVS Motor Company Ltd (TVS) and remains the sole supplier to some of their vehicle models. The company also has established relations with Maruti Suzuki Ltd (Maruti Suzuki; CRISIL AAA/Stable/A1+) for some of the products in fuel injection systems, such as fuel pumps, oil pumps, delivery pipe assembly and throttle body assembly.

Stable financial risk profile: Financial risk profile has been stable over the years with steady cash accruals, moderate capex and prudent working capital management. Networth was healthy at Rs 403 crore as on September 30, 2022. Gearing is expected to marginally improve to 0.54 times in fiscal 2023 from 0.60 times in the previous fiscal. With the expected accrual of over Rs 60 crore per annum, the company should be able to meet its capex and working capital requirements, as well as gradually reduce debt by making scheduled repayments.

Weakness:

High product and customer concentration: Ucal derives over 70% of its revenues from carburettor (electronic and mechanical) and more than 60% of revenues from Bajaj Auto and TVS. While the company has added products over the years such as air suction valve, oil pumps, vacuum pump, fuel pumps, fuel filter, throttle body assembly, and delivery pipe assembly, concentration of a single product and a few customers remains high. However, Ucal has been conducting Research and Development (R&D) for launching Fuel Injection and related ancillaries to diversify its revenue stream. Traction in the same is expected to be seen in the coming years and this remains monitorable

Key Financial Indicators

Annexure – List of entities consolidated

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