CARE Ratings - PDF document

1 1 CARE Ratings Limited Press
1 CARE Ratings Limited Press Release Devu Tools Private Limited March 2 6 , 2021 Ratings Facilities/Instruments Amount (Rs. crore) Ratings Rating Action Long Term Bank Facilities - - Reaffirmed at CARE BB; Stable (Double B; Outlook: Stable) and Withdrawn Short Term Bank Facilities - - Reaffirmed at CARE A4 (A Four) and Withdrawn Total Bank Facilities 0.00 (Rs. Only) Details of instruments/facilities in Annexure - 1 Detailed Rationale & Key Rating Drivers CARE has reaffirmed and withdrawn the outstanding ratings of CARE BB; Stable/ CARE A4 assigned to the bank facilities of DTPL with immediate effect. The above action has been taken at the request of DTPL and ‘No Objection Certificate’/ ‘No Due Certificate’ received from the bank(s) that have extended the facilities rated by CARE. The reaffirmation of ratings assigned to the bank facilities of Devu Tools Private Limited (DTPL) takes into account the moderate capital structure and debt coverage indicators along with t he stretched working capital cycle and moderation in operational performance due to the impact of COVID - 19 pandemic. The ratings continue to remain constrained by its small scale of operations, and exposure to volatility in raw material price s. The ratings, nevertheless, derive comfort from an experienced management team, long track record of operations along with established long - term relationships with reputed and diversified clientele Detailed description of the key rating drivers Key Ratin g Weaknesses Moderate capital structure and debt coverage indicators Debt levels continue to remain elevated in FY20 at Rs. 141.60 crores. Overall gearing continues to remain high at 1.60x as on March 31, 2020 (vis - à - vis 1.55x as on March 31, 2019). Total Debt to Gross Cash Accruals (GCA) however, deteriorated in FY20 to 8.72x as compared to 7.75x in FY19 on account of increased debt levels . Furthermore, interest coverage ratio although comfortable, has weakened to 1.99x in FY20 (FY1 9 : 2.19x). Stretched working capital cycle DTPL’s working capital cycle elongated to 487 days in FY20 from 349 days in FY19 primarily due to increase in the inventory holding period. The inventory holding period has deteriorated to 567 days (FY19: 382 days). Operational per formance impacted due to COVID - 19 pandemic Total operating income of the company has been impacted adversely in 9MFY21 due to the lockdown imposed to control the spread of COVID - 19 virus. The total operating income had declined in 9MFY21 to Rs 55 crore whe reas PBT declined to Rs 0.55 crore. Susceptibility to volatility in raw material prices The company depends entirely on imports for the procurement of raw materials. The major raw material for DTPL is alloy steel which the company procures from Germany. At present, the comp

2 any has sufficient raw material inventor
any has sufficient raw material inventory for the next 6 - 8 months. However, any changes in government policies for export/import norms and volatility in the raw material prices will have an impact on the company’s profitability. Key Ra ting Strengths Experienced promoters and continued financial support from them The MD & Chairman, Devaraya Sheregar has a total experience of around 25 years in the moulds and dies industry and is supported by a qualified and experienced team. Furthermore , the promoters have demonstrated financial support for the operations of the company by way of infusion of fresh equity and unsecured subordinated loans as and when required by the company. 2 CARE Ratings Limited Press Release Reputed clientele Base DTPL has a reputed clientele base consisting of companies in the pipe and the automobiles industry. Comfort can be drawn from the fact that these companies have a strong credit profile and thereby counter - party risk is mitigated to some extent. Liquidity: Stretched Liquidity is marked by tightly matched accruals to repayment obligations, highly utilized bank limits and modest cash balance of Rs Rs 0.20 crore as on March 31, 2020. Current ratio as on March 31, 2020 remained at 1.43 for DTPL. Analytical approach: Standalone. Applicable Criteria Policy on Withdrawal of ratings Criteria on assigning ‘outlook’ and ‘credit watch’ to Credit Ratings Criteria for Short Term Instruments CARE’s default recognition policy Rating Methodology - Manufacturing Companies Financial ratios - Non Financial Sector Liquidity Analysis of Non - Financial Sector Entities About the Company Established in 1993, as proprietorship concern by Mr. Devaraya Sheregar, and reconstituted to private limited company in 1999, Devu Tools Private Limited (DTPL) is engaged into designing and manufacturing of plastic injection customized moulds and dies mainly used for pipe fittings, white goods, medical goods, automobiles and drip irrigation. DTPL has plant in Mumbai (Saki Naka, Andhe ri) and Thane (Atgoan). Brief Financials (Rs. crore) FY19 (A) FY20 (A) Total operating income 103.19 99.07 PBILDT 31.44 33.64 PAT 5.20 4.18 Overall gearing (times) 1.55 1.60 Interest coverage (times) 2.19 1.99 A: Audited; Financials have been reclassified as per CARE standards. Status of non - cooperation with previous CRA: Not Applicable Any other information: Not Applicable Rating History for last three years: Please refer Annexure - 2 Annexure - 1: Details of Instruments/Facilities Name of the Instrument Date of Issuance Coupon Rate Maturity Date Size of the Issue (Rs. crore) Rating assigned along with Rating Outlook Fund - based - ST - EPC/PSC - - - 0.00 Withdrawn Fund - ba

3 sed - LT - Cash Credit - - -
sed - LT - Cash Credit - - - 0.00 Withdrawn Non - fund - based - ST - Bank Guarantees - - - 0.00 Withdrawn Fund - based - LT - Term Loan - - - 0.00 Withdrawn 3 CARE Ratings Limited Press Release Annexure - 2: Rating History of last three years Sr. No. Name of the Instrument/Bank Facilities Current Ratings Rating history Type Amount Outstanding (Rs. crore) Rating Date(s) & Rating(s) assigned in 2020 - 2021 Date(s) & Rating(s) assigned in 2019 - 2020 Date(s) & Rating(s) assigned in 2018 - 2019 Date(s) & Rating(s) assigned in 2017 - 2018 1. Fund - based - ST - EPC/PSC ST - - 1)CARE A4 (29 - Apr - 20) - 1)CARE A4 (11 - Feb - 19) 1)CARE A4 (05 - Mar - 18) 2)CARE A4 (26 - Apr - 17) 2. Fund - based - LT - Cash Credit LT - - 1)CARE BB; Stable (29 - Apr - 20) - 1)CARE BB+; Stable (11 - Feb - 19) 1)CARE BB+; Stable (05 - Mar - 18) 2)CARE BB; Stable (26 - Apr - 17) 3. Non - fund - based - ST - Bank Guarantees ST - - 1)CARE A4 (29 - Apr - 20) - 1)CARE A4 (11 - Feb - 19) 1)CARE A4 (05 - Mar - 18) 2)CARE A4 (26 - Apr - 17) 4. Fund - based - LT - Term Loan LT - - 1)CARE BB; Stable (29 - Apr - 20) - 1)CARE BB+; Stable (11 - Feb - 19) 1)CARE BB+; Stable (05 - Mar - 18) 2)CARE BB; Stable (26 - Apr - 17) Annexure - 3: Detailed explanation of covenants of the rated instrument / facilities : Not Applicable Annexure 4: Complexity level of various instruments rated for this Company Sr. No. Name of the Instrument Complexity Level 1. Fund - based - LT - Cash Credit Simple 2. Fund - based - LT - Term Loan Simple 3. Fund - based - ST - EPC/PSC Simple 4. Non - fund - based - ST - Bank Guarantees Simple Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to care@careratings.com for any clarifications. 4 CARE Ratings Limited Press Release Contact us Media Contact Mradul Mishra Contact no. – +91 - 22 - 6837 4424 Email ID – mradul.mishra@careratings.com Analyst Contact Name - Mr. Hitesh M Avachat Contact no. - 022 - 6754 3510 Email ID - hitesh.avachat@careratings.com Relationship Contact Mr. Saikat Roy Mr. Ankur Sachdeva Cell: + 91 98209 98779 Cell: + 91 98196 98985 E

4 - mail: saikat.roy@careratings.com E
- mail: saikat.roy@careratings.com E - mail: ankur.sachdeva@careratings.com About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an Exter nal Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps th e corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk - return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices. Disclaimer CARE’s ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE’s rati ngs do not convey suitability or price for the investor. CARE’s ratings do not constitute an audit on the rated entity. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, howe ver, 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. CARE or its subsidiaries/associates may also have other commercial transactions with the entity. In case of partnership/proprietary concerns, the rating /outlook assign ed by CARE is, inter - alia, based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook 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. CARE is not responsible for any errors and states that it has no financial liability whatsoever to the users of CARE’s rating. Our ratings do not factor in any rating related trigger clauses as per the terms of the facility/instrument, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and if triggered, the ratings may see volatility and sharp downgrades. **Fo r detailed Rationale Report and subscription information, please contact us at www.careratings.com