RATING RATIONALE
14 Nov 2019
Globe Capacitors Ltd.
Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of ₹ 40.50 Crores of
Globe Capacitors Ltd.
Particulars
Amount (₹ Cr) Rating*
Facility**
Previous
Previous Present Tenure Present
(July 2018)
BWR BBB
Fund Based BWR BBB
24.55 28.50 Long Term (Stable)
(Stable)
(Reaffirmed)
BWR A3+
Non-fund Based 12.00 12.00 Short Term BWR A3+
(Reaffirmed)
Total 36.55 40.50 INR Forty Crores & Fifty Lakhs Only
*Please refer to BWR website www.brickworkratings.com/ for definition of the ratings
** Details of Bank facilities/NCD/Bonds/Commercial Paper is provided in Annexure-I&II
RATING ACTION / OUTLOOK
While reaffirming the ratings of Globe Capacitors Ltd. (GCL or ‘the company’), BWR has factored in the
long operational track record of the company, association with the brands of international repute as its
direct customers, comfortable financial risk profile with moderate gearing & debt coverage metrics in
FY19 in line with the previous year’s figures. The ratings, however, remain constrained by a moderate
scale of operations as it has not been able to book a considerable growth in revenues in the past three
consecutive years.
OUTLOOK: STABLE
BWR believes that the business risk profile of Globe Capacitors Ltd. will be maintained over the
medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term.
The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained
improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins
show lower than expected figures.
KEY RATING DRIVERS
Credit Strengths:
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● Experienced & resourceful promoters and financial linkages between the associate
companies: The promoters of the company have rich experience of manufacturing capacitors for
electronics & consumer durable companies for over three decades. The promoters have their third
generation now at the helm of GCL’s operations. They also hold directorships in other associate
companies operating in diverse business lines. One of the associate companies, Greendot Health
Foods Pvt Ltd. has extended long term unsecured loans of Rs 26.34 Crs to GCL.
● Reputed clientele: GCL gets repeat orders from international clients such as LG, Samsung, Haier
etc. Domestically the company has forged marketing ties with industry majors companies such as
Usha, Orient, Crompton Greaves amongst others. The company has an association of over 20
years with some of its clients which has helped the company in mitigating its counterparty credit
risk. GCL’s order book is well diversified and no client has a revenue concentration of more than
15% with GCL.
● Comfortable financial risk profile: GCL reported operating & net margins of 11.69% & 4.17%
in FY19, higher than the previous year’s figures of 10.85% & 4.03%, respectively. Gearing of the
company remained flat at 1.10x in FY19 and the overall leverage (TOL/TNW) ratio improved
from 1.29x (FY18) to 1.10x (FY19). The analysed gearing, after adjusting for the unsecured loans
stood at 0.43x in FY19. Although the coverage ratios (DSCR & ISCR) deteriorated from 2.16x &
3.55x in FY18 to 1.98x & 3.02x in FY19 respectively, these remained comfortable.
Credit Risks:
● Moderate scale of operations: The revenues of GCL have not grown in the past three
consecutive years. Near zero growth is attributed to near 100% capacity utilisation. The company
has now gained traction from a new client in the US which is expected to give incremental
business of ~ Rs 25 Crs to GCL in FY20. Consequently, GCL has started enhancing its capacity
and is seeking additional term debt from banks to fund this expansion. Buoyed by the new
business, the company hopes to achieve Rs 130 Crs in revenues in FY20. The company expanded
its capacity from 3.75 Cr capacitors per year in FY18 to 4 Cr per year in FY19 and is poised to
increase it to 5.50 Cr capacitors per year by 2021.
● Elongated cash conversion cycle: GCL’s revenue from exports comprises 40-45% of its total
sales. The company also imports key raw materials such as zinc wire, solder wire, metal top
assembly aluminium foils, resins etc from countries such as Japan & China. As the company has
inhouse end-to-end manufacturing capability, it has to maintain a high inventory of raw material,
finished goods and stock in progress resulting in an elongated cash conversion cycle of 154 days.
The company’s inventory days stood at 136 in FY19.
ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA
The ratings of Globe Capacitors Ltd. are arrived at on a standalone basis after independent evaluation of
its financial risk profile. For arriving at its ratings, BWR has applied its rating methodology as detailed in
the rating criteria detailed below (hyperlinks provided at the end of this rationale)
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RATING SENSITIVITIES
Positive: The ratings may be upgraded if the company’s revenues and profits grow by over 20%,
alongwith improvement in debt protection metrics with ISCR>4x and DSCR>2.5x. The company must
also maintain its gearing at or below the present levels along with other favorable factors, to support a
rating upgrade.
Negative: The ratings may be downgraded if the revenues of the company reduces to less Rs 100 Crs and
DSCR & ISCR deteriorates to a less than 2.5x & 1.5x respectively.
LIQUIDITY POSITION: ADEQUATE
Adequate liquidity indicated by moderate utilisation of CC limits (around 80%), healthy current ratio
(1.84x), average cash & cash equivalents of Rs 1.67 Crs. However, the cash conversion cycle is
elongated due to the requirement of keeping higher inventory for exports. GCL’s cash accruals are
sufficient to repay the existing debt & interest expenses as indicated by healthy ISCR and DSCR of 3.02x
& 1.98x.
COMPANY PROFILE
GCL was setup in 1983 by Mr. S. P. Agarwal to manufacture customized capacitors (AC & DC) mainly
used in consumer durables/electronic items. The company is currently managed by Mr Sanjay Aggarwal
& his son Mr Vikram Aggarwal. It manufactures Metallised Polypropylene (MPP) capacitors using
dielectric technology. The company operates in the B2B segment and exports 40-45% of its products to
countries such as USA, Mexico, Bahrain, Egypt, Saudi Arabia & Thailand to the clients such as such as,
HAIER, LG, Samsung etc. while the domestic clients include companies such as Usha, Hitachi & Orient
etc.
KEY FINANCIAL INDICATORS
Key Parameters Units FY 19 FY 18
Result Type Audited Audited
Total Operating Income Rs Crore 114.62 113.05
OPBDIT Rs Crore 13.40 12.27
PAT Rs Crore 4.77 4.56
Tangible Net worth (TNW) Rs Crore 43.16 38.38
Total Debt/TNW Times 1.10 1.10
Current Ratio Times 1.84 1.76
KEY COVENANTS OF THE INSTRUMENT/FACILITY RATED: NONE
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NON-COOPERATION WITH PREVIOUS RATING AGENCY, IF ANY
RATING HISTORY
Instrument /
Current Rating Rating History
Facilities
Tenure
Amount
(Long Term/ Rating 2018 2017 2016
(₹ Cr)
Short Term)
BWR BWR BWR
Fund Based BWR BBB
Long Term 28.50 BBB BBB- BBB-
(Stable)
(Stable) (Stable) (Stable)
BWR A3+ BWR BWR BWR
Non-fund Based 12.00
Short Term A3+ A3 A3
Total 40.50 INR Forty Crores & Fifty Lakhs Only
COMPLEXITY LEVELS OF THE INSTRUMENTS
For more information, visit www.brickworkratings.com/download/ComplexityLevels.pdf
Hyperlink/Reference to applicable Criteria
Analytical Contacts Investor and Media Relations
Sumit Saharan
Primary Analyst
Board: +91-172-5032295 Ext: 104
Liena Thakur
[sumit.s@brickworkratings.com]
Assistant Vice President - Corporate Communications
+91 84339 94686
Ashwini Mital
liena.t@brickworkratings.com
[Director – Ratings]
Board: +91-172-5032295 Ext: 102
[ashwini.m@brickworkratings.com]
www.brickworkratings.com Page 4 of 6
Globe Capacitors Ltd.
ANNEXURE I
Details of Bank Facilities rated by BWR
Sl. No. Name of Type of Facilities Long Term Short Term Total
the Bank (₹ Cr) (₹ Cr) (₹ Cr)
1 Cash Credit 23.50 - 23.50
State Bank
2 of India Term Loan- Proposed 5.00 5.00
3 EPC/PCFC/FBD (20.00) (20.00)
sub limit of CC
4 LC/FLC 12.00 12.00
5 LoU (sub limit of (12.00) (12.00)
LC/FLC limit
TOTAL 28.50 12.00 40.50
Total Rupees 40.50 Crores only.
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About Brickwork Ratings :Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency,
accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings
and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. BWR is accredited
by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork
Ratings has Canara Bank, a leading public sector bank, as its promoter and strategic partner. BWR has its
corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh,
Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.
DISCLAIMER Brickwork Ratings (BWR) has assigned the rating based on the information obtained
from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable
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steps to avoid any data distortion; however, it does not examine the precision or completeness of the
information obtained. And hence, the information in this report is presented “as is” without any express or
implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy
of any such information. The rating assigned by BWR should be treated as an opinion rather than a
recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses
incurred by users from any use of this report or its contents. BWR has the right to change, suspend or
withdraw the ratings at any time for any reasons
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