Rating Rationale

Rating Rationale

March 10, 2025 | Mumbai

Vardhman Appliances Limited

'Crisil BBB+/Stable/Crisil A2' assigned to Bank Debt

Rating Action

Total Bank Loan Facilities Rated	Rs.60 Crore
Long Term Rating	Crisil BBB+/Stable (Assigned)
Short Term Rating	Crisil A2 (Assigned)

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 assigned its ‘Crisil BBB+/Stable/Crisil A2’ ratings to the bank facilities of Vardhman Appliances Limited (VAL; part of Vardhman Group).

The ratings reflect the extensive experience of VAL's promoters in the household appliance industry, the company’s longstanding relationships with reputed clients such as Usha International, Havells India and Surya Roshini. The ratings also factor in the group’s healthy financial risk profile. These strengths are partially offset by susceptibility of operating margin to volatility in raw material prices and large working capital requirement.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of VAL and its wholly owned subsidiary, Lazer India Pvt Ltd (LIPL), together referred to as the Vardhman group, as these entities have common management and have significant managerial, operational and financial linkages.

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:

Extensive industry experience of the promoters in the household appliance industry and their longstanding relationships with reputed clients: The experience of over four decades has helped the promoters gain sound understanding into the household appliance industry. Over their tenure, they have developed healthy business relationships with customers such as Usha International, Havells and Surya Roshni and bagged repeated orders from them. The group achieved revenue of Rs 585 crore during the first nine months of fiscal 2025 and is likely to clock Rs 830-840 crore for the full fiscal with the increase being supported by demand growth and addition of customers. The group reported operating income of Rs 796 crore in fiscal 2024.

Healthy financial risk profile: The group has comfortable networth, estimated at Rs 145 crore as on March 31, 2025 (Rs 93 crore as on March 31, 2024), supported by steady accretion to reserve and infusion of Rs 33 crore by private equity (PE) fund – India Inflection Opportunity Fund. In the absence of any debt-funded capital expenditure (capex) in fiscal 2025 and over the medium term, the capital structure is likely to remain comfortable with gearing and total outside liabilities to tangible networth ratio estimated at 0.4 time and 1.7 times, respectively, as on March 31, 2025 (0.8 time and 3.4 times as on March 31, 2024). The debt protection metrics are also expected to remain stable over the medium term with estimated interest coverage and net cash accrual to total debt ratios at 3 times and 0.4 time, respectively, in fiscal 2025 (3.7 times and 0.3 time in fiscal 2024).

Weaknesses:

Susceptibility of operating margin to volatility in raw material prices: The prices of key raw materials such as polymers and plastics are volatile as they depend on prices of crude oil. As raw material costs comprise 75-80% of operating income, the operating margin is susceptible to sharp adverse movement in input prices. The group expanded its operating margin to 5.3% in fiscal 2024 from 3.0% in fiscal 2023 through effective negotiation with new customers. The group is likely to maintain the operating margin at 5.0-5.5% in fiscal 2025.

Large working capital requirement: The group had high working capital requirement as indicated by gross current assets (GCAs) of 156 days, driven by receivables of 82 days and inventory of 55 days as on March 31, 2024. The working capital management is supported by payables (which stood at 127 days as on March 31, 2024). As the group deals only with reputed customers, which are dependent on it for their component requirement, it receives timely payment and faces negligible receivables-related risk. The GCAs are estimated at 140-160 days as on March 31, 2025, with receivables of 80-90 days and inventory of 50-60 days.

Liquidity: Adequate

Bank limit utilisation was 95% on average for the 12 months ended December 31, 2024. Annual net cash accrual of Rs 25-30 crore is expected against yearly debt obligation of Rs 2.5-3.0 crore over the medium term. The group maintains unencumbered cash and bank balance of Rs 15-16 crore monthly. The current ratio is estimated at 1.4 times as on March 31, 2025.

Outlook: Stable

Crisil Ratings believes that the Vardhman Group will continue to benefit from the extensive experience of its promoters and established relationships with customers and supplier

Rating sensitivity factors

Upward factors:

Sustained revenue growth of over 15% with stable operating margin of 5-6%, leading to higher-than-expected net cash accrual
Efficient working capital management, leading to improved cushion in bank limit utilization.

Downward factors:

Decline in revenue by over 20% and fall in operating margin below 3%, leading to net cash accrual below Rs 17 crore
Large debt-funded capex or further stretch in working capital cycle, impacting the financial risk profile and liquidity.

About the Group

Initially set up as Vardhman Electrical Appliances in 1983 and was subsequently converted into a limited company in August 2023 as VAL. Further, w.e.f. April 1, 2024, VAL took over the existing business of its group companies (Quality Industries and Vardhman Home Appliance Ltd). VAL manufactures and markets various types of household appliances. It undertakes contract manufacturing for large players such as Usha, Havells and Surya Roshni. Pramod Kumar Jain, Subodh Kumar Jain and Vinod Kumar Jain and the second generation of the Jain family are involved in the management of business operations of the group.

Founded in 2001 as partnership firm, it was converted to LIPL in 2017 and sells products under its own brand Lazer. It has become a subsidiary of VAL from September 28, 2024. LIPL is engaged in trading of wide range of consumer appliances such as mixers, grinders, fans, air coolers, electric irons and air fryers under its brand Lazer.

Key Financial Indicators

As on/for the period ended March 31		2024	2023
Operating income	Rs crore	795.9	813.8
Reported profit after tax (PAT)	Rs crore	22.1	16.3
PAT margin	%	2.7	2.0
Adjusted debt/adjusted networth	Times	0.8	1.5
Interest coverage	Times	3.7	2.6

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	Bill Discounting	NA	NA	NA	10.25	NA	Crisil A2
NA	Cash Credit	NA	NA	NA	14.50	NA	Crisil BBB+/Stable
NA	Drop Line Overdraft Facility	NA	NA	NA	6.10	NA	Crisil BBB+/Stable
NA	Letter of Credit	NA	NA	NA	17.50	NA	Crisil A2
NA	Proposed Cash Credit Limit	NA	NA	NA	0.65	NA	Crisil BBB+/Stable
NA	Rupee Term Loan	NA	NA	31-Jan-30	11.00	NA	Crisil BBB+/Stable

Annexure – List of entities consolidated

Names of Entities Consolidated	Extent of Consolidation	Rationale for Consolidation
Lazer India Private Limited	100	Common promoters and in same line of business
Vardhman Appliances Limited	100	Common promoters and in same line of business

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/ST	42.5	Crisil BBB+/Stable / Crisil A2		--		--		--		--	--
Non-Fund Based Facilities	ST	17.5	Crisil A2		--		--		--		--	--

All amounts are in Rs.Cr.

Annexure - Details of Bank Lenders & Facilities

Facility	Amount (Rs.Crore)	Name of Lender	Rating
Bill Discounting	10.25	YES Bank Limited	Crisil A2
Cash Credit	14.5	YES Bank Limited	Crisil BBB+/Stable
Drop Line Overdraft Facility	6.1	YES Bank Limited	Crisil BBB+/Stable
Letter of Credit	17.5	YES Bank Limited	Crisil A2
Proposed Cash Credit Limit	0.65	Not Applicable	Crisil BBB+/Stable
Rupee Term Loan	11	YES Bank Limited	Crisil BBB+/Stable

Criteria Details

Links to related criteria

Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)

Basics of Ratings (including default recognition, assessing information adequacy)

Criteria for consolidation

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