Ratings TLT Engineering India Private Limited Facilities Amount (Rs. crore) Ratings 1 Remarks Long-term Bank Facilities 9.45 CARE BBB- (Triple B Minus) Reaffirmed Long/Short-term Bank Facilities 35.00 CARE BBB- (Triple B Minus) / Reaffirmed & Reclassified (from Shortterm to Long-term / Short-term) CARE A3 (A Three) Short-term Bank Facilities 4.00 CARE A3 (A Three) Reaffirmed Total Facilities 48.45 Rating Rationale The ratings assigned to the bank facilities of TLT Engineering India Private Limited (TLT) continue to derive strength from significant experience and track record of the promoters in the manufacturing of industrial fans and accessories, moderate order book position, comfortable capital structure and adequate debt coverage indicators. The ratings are, however, constrained by the decline in operating profitability margins during FY14 (refers to period April 1 to March 31), high working capital-intensive nature of operations and cyclicality in the end-user industry. TLT s ability to efficiently manage its working capital, maintain comfortable capital structure & profitability along with timely execution of orders remains the key rating sensitivities. Background Incorporated in 1988, TLT Engineering India Private Limited (TLT) is engaged in designing, manufacturing, and after-sales service of industrial fans and its accessories which find application in heavy engineering, oil & gas, steel and cement sectors. The manufacturing facility of TLT is located at Indrad (district Mehsana), Gujarat. Key updates Moderate order book position providing revenue visibility As on September 30, 2014, the TLT has order book of Rs.45.13 crore which is around 0.73 times of FY14 total income, providing revenue visibility in the short term. The current order book of the company consist of orders from reputed client base (viz major original equipment manufacturers (OEMs) such as Thermax Limited, ISGEC Heavy Engineering Limited, Steel Authority of India Limited, HPCL-Mittal Energy Limited, ThyssenKrupp Industries India Private Limited and others), from where it has been consistently receiving several repeat orders over the past few years. Furthermore, going forward, the ability of TLT to continuously source orders would be critical from credit perspective. Favourable financial risk profile with low gearing and adequate coverage indicators The overall capital structure of the company has been comfortable due to low reliance on debt and has further improved (with overall gearing stood at 0.08 times March 31, 2014, from 0.17 times as on March 31, 2013) on account of accretion of profits and lower utilization of working capital borrowings to fund operations. On account of this, the debt coverage indicators have also improved [with interest coverage at 4.20x and total debt to GCA of 0.98 for FY14] and continued to remain comfortable. Apart from the above, the company also has a healthy liquidity position due to un-utilized working capital borrowings (average utilization for the past 12 months ending September 2014 has been 73%) and free cash & bank balances (amounting to Rs.4.07 crore as on March 31, 2014). Stable operating income though sharp decline in profitability In FY14, the growth of income (grown by 3.78% vis-à-vis FY13) has remained marginal on the back of slower execution of orders and holding up the capital expenditure in key consuming industries. Moreover, In H1FY15, TLT has posted total operating income of Rs.25.07 crore. Moreover, on account of slow-down in its primary client industry, operating profitability margins have declined (from 19.14% in FY13 to 8.51% in FY14) owing to competitive bidding for availing orders and retaining its client base. Furthermore, in line with 1 Complete definitions of the ratings assigned are available at www.careratings.com and other CARE publications 1
operating margins the net profit margin has also declined to 2.80% in FY14 from 9.68% in FY13. Elongated operating cycle Working capital cycle remained elongated in FY14 on account of high inventory and collection period. The inventory holding was high due to work in process inventory on account of slower execution of projects. Furthermore, of the total order value, around 15-20% of the retention money is blocked and is released only post successful testing and commissioning of the projects. However, comfort can be drawn, as the company has reputed client base, thus counter party risk is off-set to an extent. On account of high working capital intensity utilisation of working capital remained moderately high at 73% for past 12 months ended September, 2014. However, TLT has modified the payment terms for the new orders to reduce the blocking of funds arising due to delay by other vendors for execution of project. Prospects The growth prospects of TLT would be governed by its ability to continuously maintain healthy order book and conversion of order amidst the sluggish economic scenario. Furthermore, the ability of TLT to maintain favourable financial risk profile would be critical for a credit profile. Financial Performance (Rs. Cr) For the period ended / as at March 31, 2012 2013 2014 (12m, A) (12m, A) (12m, A) Working Results Net Sales 69.21 58.41 60.43 Total Operating income 71.14 59.54 61.79 PBILDT 10.20 11.40 5.26 Interest 1.71 1.39 1.25 Depreciation 0.99 1.42 1.51 PBT 7.50 8.63 2.57 PAT (after deferred tax) 5.22 5.76 1.73 Gross Cash Accruals 6.28 7.52 3.28 Financial Position Equity Capital 0.95 0.95 0.95 Networth 34.44 39.99 41.57 Total capital employed 44.89 47.02 44.98 Key Ratios Growth Growth in Total income (%) 6.98 (16.30) 3.78 Growth in PAT (after D.Tax) (%) 5.81 10.38 (70.01) Profitability PBILDT/Total Op. income (%) 14.33 19.14 8.51 PAT (after deferred tax)/ Total income (%) 7.34 9.68 2.80 ROCE (%) 22.74 21.79 8.21 Solvency Long-term Debt Equity ratio (times) 0.00 0.09 0.07 Overall gearing ratio(times) 0.30 0.17 0.08 Interest coverage(times) 5.96 8.22 4.20 Term debt/gross cash accruals (years) 0.00 0.48 0.84 Total debt/gross cash accruals(years) 1.66 0.90 0.98 Liquidity Current ratio(times) 1.57 2.45 2.66 2
Quick ratio(times) 1.29 1.83 1.81 Turnover Average collection period (days) 122 126 94 Average inventory (days) 57 76 88 Average creditors (days) 59 66 46 Operating cycle (days) 120 136 135 Details of rated Facilities 1. Long-term facilities 1.A. Fund-based term loans Sr. No. Name of Bank Fund-based Limits (Rs. crore) Rated amount* Total fund-based limits 1. Canara Bank 1.95 1.95 TOTAL 1.95 1.95 *Outstanding as on November 11, 2014. 1.B. Fund-based working capital limits Sr. No. Name of Bank Fund-based Limits (Rs. crore) Cash Credit Total fund-based limits 1. Canara Bank 7.50 7.50 TOTAL 7.50 7.50 Total Long-term facilities (1A+1B) - Rs.9.45 crore 2. Long/Short-term facilities 2.A. Non-fund-Based Limits Sr. No. Name of Bank Non-fund-Based Limits (Rs. crore) Bank Guarantee Total non fund-based limits 1 Canara Bank 35 35 TOTAL 35 35 Total long/short-term facilities - Rs.35.00 crore 3. Short-term facilities 3.A. Non-fund-Based Limits Sr. No. Name of Bank Non-fund-Based Limits (Rs. crore) Letter of Credit Total non-fund-based limits 1 Canara Bank 4 4 TOTAL 4 4 Total Long/Short-term facilities - Rs.4 crore Total Bank Facilities (1 +2+3) = Rs.48.45 crore Analyst Contact Name: Mr. Nitesh Dhoot Tel: 02267542442 Email: nitesh.dhoot@careratings.com (This follows our brief rational for entity published on 05 December 2014) 3
Disclaimer: CARE s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/proprietary concerns, the rating assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors. 4
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