Jyoti CNC Automation Private Limited
RATING HISTORY
Maturity
date
Rs. 888.90 million Term Loans
Rs. 450.00 million Fund based limit
Rs. 210.00 million Fund based limit
Rs. 160.00 million Non-Fund based limit
ICRA has assigned an LBB+
(pronounced L Double B plus) rating
to the Rs. 888.90 million term loans
and Rs. 450.00 million fund based
limits of Jyoti CNC Automation
Private Limited (JCAPL), indicating
inadequate credit quality†. ICRA has
also assigned an A4+ (pronounced A
Four plus) rating to the Rs. 210.00
million fund based and Rs. 160.00
million non-fund based limits of
JCAPL, indicating risk-prone credit
quality in the short term. JCAPL’s
long term fund based limits (CC and
term loan) up to Rs. 150.00 million
are interchangeable with short term
non-fund based limits (LC), long term
fund based limits (CC) up to Rs.
280.00 million are interchangeable
with short term fund based limits and
short term fund based limits up to Rs.
45.00 million are interchangeable
with long term fund based limits (CC).
The ratings factor in the firm’s healthy
operating margins, moderate gearing
and established track record in the
machine tool industry which is
characterized by significant entry
barriers. However, the firm has
severe liquidity constraints on
account of high inventory and an
increase in export-led receivables
which have resulted in excessive
utilization of working capital limits.
The ratings are also constrained by
the firm’s weak cash flow indicators,
For complete rating scale and
definitions please refer to ICRA's
Website www.icra.in or other ICRA
Rating Publications
†
Rating Outstanding
-
significant contingent liabilities and
risk associated with demand from key
user industries over the short to
medium term.
Rajkot based JCAPL was established
in the year 2001 and is a
manufacturer of CNC metal cutting
machines. JCAPL is promoted by Mr.
Parakramsinh Jadeja, whose family
has a 51% shareholding in the firm.
JCAPL currently manufactures CNC
Turning Lathes, Vertical Machining
Centers (VMC), Horizontal Machining
Centers (HMC) and Special Purpose
Machines (SPM). In FY09, the firm
recorded a net sale of Rs. 1.43 billion
and a net income of Rs. 43.54 million.
JCAPL has demonstrated strong
design and execution capabilities and
has a significant presence in the
domestic machine tool industry. The
ratings draw comfort from the long
track record of the promoters in the
industry. Prior to establishing JCAPL,
Mr. Parakramsinh Jadeja was a
partner in Jyoti Enterprise since 1989
which started off as a manufacturer of
gear boxes for lathe machines and
subsequently
ventured
into
manufacturing CNC Turning and
Milling machines.
In November 2007, JCAPL acquired
Huron Grafenstadden (Huron), a
French company involved in
supplying high end (4 and 5 axes)
CNC milling machines to the
aerospace and general engineering
industry in Europe. A Special
Purpose Vehicle (SPV) was formed
Previous
Ratings
August 2009
LBB+
LBB+
A4+
A4+
by JCAPL in France to acquire 100%
shares of Huron. The ratings are
constrained by the lack of adequate
clarity on the financial strength of
Huron and the conditional liability
arising out of JCAPL’s action of
guaranteeing repayment of a loan
amounting to €11.25 million availed
by its SPV in France to acquire
Huron.
JCAPL
currently
has
three
manufacturing units based in Rajkot
spread over a total area of 3,36,000
sq meters. In order to achieve
backward integration, the firm set up
an in-house foundry, sheet metal
plant and paint shop in FY08.
Backward integration enabled the
firm to reduce the sourcing time for
critical raw materials and increase its
production capacity from 500
machines in FY06 to 1500 machines
in FY08. Significant debt funded
capital expansion undertaken since
FY06 led to an increase in the firm’s
leverage. However, the firm’s ability
to infuse equity on a regular basis
has helped it maintain a moderate
gearing level.
JCAPL’s revenue grew at a CAGR of
37% since FY06 primarily on account
of an increase in its production
capacity. The revenue was fairly flat
in FY09 due to a de-growth in the
domestic market as the key user
segments of automobiles and capital
goods experienced a slowdown.
However, the ratings draw comfort
from JCAPL’s recent foray into
component
manufacturing
and
increase in business from the power
and defence sector. The risk of
slowdown in the domestic market
was mitigated to some extent as the
firm gained access to the export
market of Europe through Huron’s
dealer network. While the firm’s
domestic sales in FY09 shrunk by
around 16% as compared to FY08,
export sales grew by around 55%.
The firm derives export revenues
mainly from sale of machines to its
French subsidiary, Huron.
The OPBDITA margins of the firm
have steadily increased since FY06
with an average margin of around
15% from FY06 to FY09. This
increase is primarily driven by a
reduction in sourcing costs due to
backward integration and an increase
in the percentage of high margin
exports. However, the firm’s ROCE
has declined from 22% in FY07 to
11% in FY09 due to a slowdown in
the firm’s revenue growth rate
accompanied by significant capital
expenditure.
An increase in export sales has led to
a subsequent increase in JCAPL’s
debtor days. The firm’s debtor days
increased from around 33 days at the
end of FY07 to around 88 days at the
end of FY09. The firm’s liquidity
position has further worsened due to
a significant increase in its inventory
during the second half of FY09. The
inventory days increased from around
173 days at the end of FY08 to
around 325 days at the end of FY09.
Deferment of delivery of existing
orders during the second half of FY09
led to a significant increase in its
work in progress and finished goods
inventory.
Due
to
a long
manufacturing cycle time of its
product, JCAPL’s ability to generate
cash from operations is highly
contingent on quicker recoveries from
its customers and faster turnaround
of inventory.
About the company
Horizontal Machining Centers (HMC)
and Special Purpose Machines
(SPM). In November 2007, JCAPL
acquired Huron Grafenstadden
(Huron), a French company involved
in supplying high end (4 and 5 axes)
CNC milling machines to the
aerospace and general engineering
industry in Europe. In the year ending
December 2007, Huron reported a
net sale of €33 million. JCAPL
currently has three manufacturing
units based in Rajkot spread over a
total area of 3,36,000 sq meters.
JCAPL
completed
backward
integration in FY08 by setting up an
in-house foundry, sheet metal plant
and paint shop. Currently, the firm
has a manufacturing capacity of 1500
machines per annum.
Recent Results
Rajkot based JCAPL was established
in the year 2001 and is a
manufacturer of CNC metal cutting
machines. JCAPL is promoted by Mr.
Parakramsinh Jadeja, whose family
has a 51% shareholding in the firm
while the Virani family owns the
balance 49%. JCAPL currently
manufactures CNC Turning Lathes,
Vertical Machining Centers (VMC),
Key Past Financial Indicators
In Rs. million
In FY09, JCAPL sold 703 machines
and
recorded
a
net
income(provisional) of Rs. 43.54
million on a net sale(provisional) of
Rs. 1.43 billion.
August 2009
FY05
FY06
FY07
FY08
Audited
Audited
Audited
Audited
Operating Income
224.7
565.4
924.2
1473.7
OPBDIT
32.2
59.4
123.1
247.9
PAT
9.7
19.6
39.4
47.3
94.4
271.4
635.1
1004.5
OPBDIT/Operating Income
92.0
14.35%
196.3
10.51%
298.6
13.32%
659.3
16.82%
PAT/Operating Income
4.32%
3.47%
4.26%
3.21%
Total Debt
Networth
Total Debt/(TNW + Minority Interest) (Times)
1.03
1.38
2.13
1.52
OPBDIT – Operating Profit Before Depreciation Interest & Taxes, PAT – Profit After Tax, TNW – Total Net Worth
For further details please contact:
Analyst Contacts:
Mr. Rohit Inamdar (Tel No. +91-124-4545847)
rohit.inamdar@icraindia.com
Relationship Contacts:
Mr. L. Shivakumar, (Tel. No. +91-22-30470005)
shivakumar@icraindia.com
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