CRISIL assigns ratings to bank facilities of Bajaj Electricals

25 Mar 2022 , 01:32 PM

These ratings have been placed on rating watch with developing implications while the rating on the short-term debt programme of the BEL has been reaffirmed at CRISIL A1+.

The rating action takes into consideration the announcement made by the company on 8 February 2022 that its board of directors has approved restructuring of the business through a scheme of arrangement.

As per this, part of the EPC business (power distribution and power transmission; contributing 16% to revenue) business will be demerged into a separate company, Bajel Projects (BPL), while BEL will continue to hold the consumer products and Illumination segments.

The demerger is likely to result in improvement in the credit profile of BEL (continuing business of consumer products segment) as the EPC business has lower operating profitability and high working capital intensive operations.

The credit profile of the demerging business (EPC) is likely to be weaker by not more than a rating category. Hence, the bank loan ratings have been put on watch with developing implications as the bank limits are for the combined entity (ongoing consumer products business and EPC business) and the clarity on bifurcation of limits between continuing and demerging business is pending.

Further, approvals for demerger process are awaited. The rating on short term debt of Rs 100 crore has been reaffirmed as it pertains to consumer products business that will continue in BEL post demerger.

The managements focus on deleveraging the balance sheet has borne fruit in recent years, as reflected in decline in gross debt to Rs 201 crore as on 31 December 2021, from Rs 1,911 crore as on 31 March 2019. This along with improved accrual has led to a sharp improvement in adjusted gearing (excluding channel financing) to 0.31 time from over 0.75 times during the same period.

The company is expected to become net debt free in fiscal 2022, and dependence on external debt will likely remain minimal over the medium term backed by better receivables realisation in the EPC business, healthy cash flows (Rs 300-350 crore per annum) and BEL availing a non-recourse vendor financing limit.

Bajaj Electricals is an established player in the consumer electronics and durables industry.BEL also has presence in the premium range of appliances with the brand, Morphy Richards.

In the first nine months of fiscal 2022, company has posted revenue of Rs 3448 crore against profit after tax (PAT) of Rs 109 crore, compared with Rs 3319 crore against Rs 128 crore in the corresponding period of the previous fiscal.

The scrip declined 1.58% to currently trade at Rs 1044.90 on the BSE.

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