Rating Rationale

Jyoti CNC Automation Ltd

24 Dec 2019

Brickwork Ratings reaffirms and assigns the ratings for the Bank Loan Facilities of ₹
640.57 Crores of Jyoti CNC Automation Ltd (JCNCAL or the ‘Company’).

Particulars
Amount (₹ Crs) Rating*
Facility Tenure
Previous Present Previous (October 2019) Present

Fund based

Term Loan 7.00 110.80 BWR BBB+ BWR BBB+

Long Outlook: Stable Outlook: Stable
Fund Based Term
260.00 360.00
Working Capital

Non Fund Based

Bank Guarantee / Long BWR A2 BWR A2

169.02 169.77
Letter of Credit Term

INR Six Hundred Forty Crore and Fifty Seven

Total 436.02 640.57
Lakhs Only
*Please refer to BWR website ​www.brickworkratings.com/​ for definition of the ratings
Complete details of Bank facilities is provided in Annexure-I

Ratings: Reaffirmed for the existing facilities & Assignment for the enhancement in limits

BWR has principally relied upon the audited financial results of the Company up to FY19,
1HFY20 unaudited financials, updated sanction letters, projected financials, publicly available
information and information/clarifications provided by the Company’s management.
In view of increase in installed capacity from 3000 CNC Machines/Annum to 3600 CNC
Machines/Annum, requirement of working capital has increased and hence the Company has
received enhancement in working capital limits from Consortium member banks and Term Loan
(For CAPEX already executed towards increase in installed capacity) from Consortium member
banks.

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Rationale/Description of Key Rating Drivers/Rating sensitivities:

The rating factors stable operating performance for 1HFY20, coupled with the extensive
experience of the promoters in the Machine Tool industry, its professional and experienced
Management, ability of the promoters to infuse funds when required and Company’s high
technical capabilities which is derived from the acquisition of Huron, France and synergies
achieved.
The rating is, however, constrained by the nature of machinery manufacturing industry which
involves long working capital cycle and hence high level of working capital borrowings, less than
optimal return on the investment made in overseas operations and moderate gearing level.

Description of Key Rating Drivers

Credit Strengths:
● Improvement in operating performance: ​At standalone level, total operating income of the
Company increased by 21% to Rs.791 Cr and net profit increased by 56.7% to Rs.34.79 Cr,
backed by timely execution of orders and more than 85% capacity utilization. The Company has
comfortable leverage of 1.0x as on March 31, 2019 with the networth of 390.9 Cr. Debt coverage
indicators are also comfortable with ISCR at 2.0x and DSCR of 1.7x.
During 1HFY20, the company achieved turnover of Rs​.​ Rs.320 Cr with net profit of Rs. 17 Cr.

● Experienced Management: ​The Company is promoted by Mr. P G Jadeja who has been in
machine tool industry for more than two decades. He is the past President of Indian Machine
Tools Manufacturers’ Association (IMTMA). He is supported by qualified and experienced
management team. The management has established track record of regularly infusing funds in
the Company.

● Synergies with acquisition of Huron: Jyoti CNC has acquired a 150 years old French Machine
Tool Company in 2007 – Huron Graffenstaden SAS. Huron is having two manufacturing plant at
Strasbourg, France and a strong sales and service network all over Europe. The acquired
company is a pioneer across world for its 5 axis machining centers, having a renowned clientele.
Huron contributes to 25-30% of the consolidated turnover of the Company, JCNCAL.

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 ● Comfortable order book Position​: The Company has confirmed order book (Advance/Token
against order has been received) of Rs.547 Cr as on September 30, 2019. The quantum of orders
in hand proves the Company’s dominance in CNC Machines market share.

Credit Risks:

● Working capital Intensive: ​Highly working capital is required due to nature of activity as
Inventory levels are high because of the large variety of components that the Company has to
maintain as raw materials and also as spares. The end products are also carried as work in
progress as long as it is in Jyoti CNC’s premise and its sale is realized once the commissioning
and other criteria are fulfilled. Further, the Company earns approximately 10% of its revenues
from sale to Government agencies. Delay in payment receipts from government agencies also
leads to increase in receivables cycle.

● Exposure to Global Economy: Being a capital goods manufacturing company, it is prone to the
economic scenario and situation in Europe impacts the Company’s top-line.

Liquidity (Adequate): ​The Company being in manufacture of capital goods, working capital
requirements remains high. As on September 30, 2019, the Company had cash and cash equivalents of
Rs.22.38 Cr and unutilized portion of fund based limit of Rs. 7.45 Cr with CPLTD for term loan of Rs.9
Cr.

Analytical Approach
BWR has analyzed Jyoti CNC on standalone basis, 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).
Rating Outlook: ​Stable
BWR believes the ​Jyoti CNC Automation Ltd’s ​business risk profile 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.

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Rating Sensitivities:
Positive: ​Improvement in operating performance will be credit positive.

Negative: ​Further increase in total debt not supported by the adequate operating cashflows will
be credit negative.

About the Company

JCNCAL was incorporated as AMB Engineering Company Private Limited in 1991 in Rajkot,
Gujarat. It became a public limited company in 2012 and came to be known as Jyoti CNC
Automation Limited. It is into manufacturing of CNC machine tools and multi-axial machining
centers. The manufacturing facilities are located in Rajkot itself. JCNCAL formed an SPV called
Jyoti SAS in France to acquire a French machine tool company Huron Graffenstaden SAS in
2007. It manufactures high end CNC machines at its two manufacturing plants in France. They
also have marketing outfits in Germany and Canada.

JCNCAL is promoted by Jadeja family and Virani family having around 32.69% and 46.76%
holding respectively in the Company with another 14.62% held by Jyoti International Private
Limited. As of now, the Virani family holds only financial interest in Jyoti CNC and is not
represented on the Board, nor is it part of the Company’s day-to-day management.

Business Highlights

JCNCAL offers a range of CNC metal cutting products for both Turning and Milling operations
like CNC Turning Centers, CNC Turn Mill Centers, CNC Vertical Machining Centers (3-4-5
Axes), CNC Horizontal Machining Centers and CNC 5 axis Machining Centers. The products are
manufactured in-house right from designing to preparing casting in foundry till final dispatch.
The Company has offices in major cities of India and its Technology Centers are located at
Rajkot with two more Centers at Chennai and Pune under process. It also exports its entry level
machines to European countries and is selling high end machines made by Huron, in India.

Company Financial Performance

Rs. Cr FY18 FY19
Standalone Audited Audited
Total Operating Income 662.29 791.43
OPBIT 122.02 136.6
PAT 22.2 34.79

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Total Debt 491.91 407.60
Tangible Networth 372.16 390.89
Gearing (x) 1.3 1.0
Current Ratio 1.07 1.14

During 1HFY20, the company achieved turnover of Rs​.​ Rs.320 Cr with net profit of Rs. 17 Cr.
Rating History for the last three years

Status of non-cooperation with previous CRA (if applicable)-Reason and comments

Any other information

Hyperlink/Reference to applicable Criteria

● General Criteria

● Approach to Financial Ratios

● Manufacturing Sector

● ​Short Term Debt

For any other criteria obtain hyperlinks from website

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 Analytical Contacts Investor Contacts

Vidya Shankar
Senior Director - Ratings
B :+91 80 4040 9940 Liena Thakur
vidyashankar@brickworkratings.com Assistant Vice President - Corporate
Communications
+91 84339 94686
Forum R Parekh liena.t@brickworkratings.com
Analyst - Ratings
D : +91 22 6745 6621
B :+91 22 2831 1426, +91 22 2831 1439
forum.rp@brickworkratings.com
1-860-425-2742

ANNEXURE I
Details of Bank Facilities rated by BWR
Sl. No. Name of the Type of Facilities Long Term Short Term Total
Bank {​(₹ Cr) (₹ Cr) (₹ Cr​)
1. Corporation Working capital 98.68 99.24 197.92
Bank
2. State Bank of Working capital 83 52.53 135.53
India
3. IDBI Bank Working capital 33.5 18 51.5
4. Bank of India Working capital 49.60 49.60
5. Bank of Baroda Working capital 32 32
6. Oriental Bank of Working capital 45 45
Commerce and Term Loan
7. Exim Bank Term Loan 85.80 85.80
8. Proposed Credit Working Capital 43.22 43.22
Limits (Indian
Bank)
TOTAL 640.57
Total Rupees Four Hundred and Thirty Six Crores and Two Lakhs only.

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issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any
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