August 25, 2020

Airvision India Private Limited: Rating reaffirmed

Summary of rating action

Previous Rated Amount Current Rated Amount
Instrument* Rating Action
(Rs. crore) (Rs. crore)
Fund based-Cash Credit 8.50 8.50 [ICRA]BB- (Stable); reaffirmed
Fund based-Term loan 2.50 2.50 [ICRA]BB- (Stable); reaffirmed
Non-fund Based 19.0 19.0 [ICRA]A4; reaffirmed
Total 30.0 30.0
*Instrument details are provided in Annexure-1

Rationale
ICRA has taken a consolidated view of the business and financial risk profiles of Noble Moulds Private Limited (NMPL),
Airvision India Private Limited (AIPL) and Sun Industries (SI) in order to arrive at the ratings. They are collectively referred
herein as the Noble Group because of the operational synergies, common promoters and significant business
transactions.

The ratings reaffirmation takes into account the decline in operating income of Group in FY 2019 although the same
witnessed a healthy growth in FY2020. Moreover, the debt coverage indicators continue to be modest albeit some
improvement in FY 2020.

The ratings, continue to be constrained by the Group’s modest financial profile characterised by low profitability amidst
intense competition in the consumer durable industry, which limits the pricing power and profit margins. ICRA also notes
leveraged capital structure and weak debt coverage indicators. The ratings also take into account the vulnerability of the
Group’s profitability to fluctuations in foreign exchange rates on import purchases, and high working capital intensive
nature of operations. The liquidity profile of Group is also modest as reflected by high utilization of working capital limits
and low cash and bank balances.

Nonetheless, the ratings continue to positively consider the established position of the Noble Group as a contract
manufacturer of moulded components for leading consumer durable principals. ICRA also notes its established and
reputed customer base, and location advantage, given the proximity of its facilities to key customers and suppliers.

The Stable outlook on the [ICRA]BB- rating reflects that Noble Group will continue to benefit from the extensive
experience of its promoters in the contract manufacturing business for consumer durables and will also leverage its
established relationship with reputed client base.

Key rating drivers and their description

Credit strengths
Extensive experience of promoters in the contract manufacturing industry - The major operations of the Group are
handled by the promoter, Mr. Sarbjit Singh Kalra, who has over three decades of experience in the electronics and
consumer durables industry. The company also manufactures and sells washing machines, LED TVs and coolers, under its
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own brand, ‘Daenyx’. The Group’s client base includes reputed consumer durables companies like LG, Haier, Voltas,
USHA, Samsung, Singer India, BPL, Livpure, Flipkart etc. The Group has enjoyed a strong relationship with most of its
clients for close to two decades, and has been able to secure several repeat orders over the years.

Location advantage, given the proximity to key customers and suppliers- The locations of the Group’s manufacturing
facilities give it a competitive advantage in terms sourcing raw material, manufacturing at relatively cheap power tariff
rates in Uttar Pradesh and Uttarakhand, and engaging labour at relatively lower costs. Further, these locations enable
the Group to stay in proximity to its key customers like LG, Samsung, Haier, etc, whose manufacturing operations stand
in the same regions as the Group’s.

Healthy revenue growth in FY2020- There has been significant growth in revenues for the group in FY2020 on account of
healthy incremental sales in LED TVs. Further, fresh addition of clients also resulted in additional order flow. The
consolidated revenue of the group (after netting-off the inter-group sales) increased from Rs 181.2 crore in FY2019 to Rs
248.9 crore in FY2020.

Credit challenges
Weak profitability levels, given the high competitive intensity and limited value-added nature of operations - The
profitability of the Group remains weak, given the limited value-added nature of operations and pricing pressures from
the intense competition in the consumer durables industry. The Group’s operating profit margins (OPM) stood at 6.39%
in FY2020 as against 6.72% in FY2019, while its net profit margins (NPM) stood at 0.91% in FY2020 as against 0.75% in
FY2019.

Leveraged capital structure and moderate debt coverage indicators - The Group’s capital structure continued to remain
moderately leveraged as on March 31, 2020, with gearing at 1.97 times, given the debt levels. Moreover, the debt
coverage indicators continued to remain weak due to weak profitability with interest coverage at 1.7 times, NCA/TD at
7.8% and TD/OPBDITA at 4.71 times as on March 31st, 2020.

Working capital intensive nature of operations - The working capital intensity of the Group’s operations has improved
significantly owing to considerable decline in the receivable days. The debtor days declined on account of more
utilization of LC discounting, which the group has started using and is available at cheaper rate than the interest rate on
fund based working capital. However, the operations remain working capital intensive with more than 90% of the
working capital utilization across all the three companies in the group.

Liquidity position: Stretched

The liquidity of the group is stretched with high utilization of working capital limits and limited cash balances. The
liquidity is, although supported by promoter’s loans and Covid-19 bank loans at reduced rates.

Rating sensitivities
Positive trigger: The rating may be upgraded, in case profitability levels and debt coverage improve on a sustained basis.
Interest coverage greater than 2 times on sustained basis might trigger an upgrade.

Negative trigger: The rating downgrade is likely if there is delay in demand resurrection and revival in consumer
sentiments post lockdown due to Covid-19 outbreak. Further, inability to maintain comfortable liquidity of the group
resulting from deterioration in the working capital intensity might also warrant a downgrade.

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Analytical approach
Analytical Approach Comments

Applicable Rating Methodologies Corporate Credit Rating Methodology

Parent/Group Support Not applicable

Consolidation/Standalone Consolidated

About the company

Incorporated in 1995, AIPL is among one of the five group concerns of the Noble Group. The company is involved in the
manufacture of printed circuit boards (PCB) that find application in LED televisions and compact fluorescent light bulbs.
Along with manufacturing PCBs, the company is also involved in cooler assembling.

The Noble Group was incorporated in 1982, when its founder Mr. Sarbjit Singh Kalra started a small unit in Delhi to make
fuses and sockets for use in the electronic industry. Subsequently, it expanded to the manufacture of PCBs and TV
cabinets. The Group established a computer numerical tool room in the late eighties, which followed by a molding unit at
Noida. At present, the Group is engaged as a contract manufacturer of moulded components for leading consumer
durable principals as well as consumer durable goods like coolers, washing machines, printed circuit boards etc. The
Group has manufacturing facilities in Noida, Uttar Pradesh and Haridwar, Uttarakhand. Also, it manufactures and trades
in washing machines, LED televisions and coolers through its another group company, Daenyx International Private
Limited and which sells under its own brand name “Daenyx”.

Key financial indicators- Consolidated (audited)

FY2018 FY2019
Operating Income (Rs. crore) 217.0 181.2
PAT (Rs. crore) 1.05 1.35
OPBDIT/OI (%) 5.62% 6.72%
RoCE (%) 9.62% 8.54%

Total Outside Liabilities/Tangible Net Worth (times) 3.73 3.62

Total Debt/OPBDITA (times) 5.79 6.43
Interest Coverage (times) 1.59 1.59
DSCR 1.34 1.20

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

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Rating history for past three years
Current Rating (FY2021) Rating History for the Past 3 Years

Instrument Amount Amount Rating FY2020 FY2019 FY2018

Type
Rated Outstanding 31-January-2019 10-July-2017
25-August-2020 -
Fund-
Long
1 based/Cash 8.50 8.50 [ICRA]BB-(Stable) - [ICRA]BB-(Stable) [ICRA]BB-(Stable)
Term
Credit

Fund-
Long
2 based/Cash 2.50 2.50 [ICRA]BB-(Stable) - [ICRA]BB-(Stable) [ICRA]BB-(Stable)
Term
Credit

Non-fund Short
3 19.0 19.0 [ICRA]A4 - [ICRA]A4 [ICRA]A4
Based Term

Amount in Rs. crore

Complexity level of the rated instrument

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The
classification of instruments according to their complexity levels is available on the website www.icra.in

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Annexure-1: Instrument details
Amount
Date of Issuance / Coupon Maturity Rated Current Rating
ISIN Instrument Name Sanction Rate Date (Rs. crore) and Outlook
Fund-based/Cash
NA Credit
NA NA NA 8.50 [ICRA]BB-(Stable)
NA Fund-based/Cash
NA NA NA 2.50 [ICRA]BB-(Stable)
Credit
NA Non-fund Based NA NA NA 19.0 [ICRA]A4
Source: AIPL

Annexure-2: List of entities considered for consolidated analysis: Not applicable

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Analyst Contacts
K. Ravichandran Manish Ballabh
+91-44-45964301 +91-124-4545812
ravichandran@icraindia.com manish.ballabh@icraindia.com

Gaurav Singla Nishant Misra

+91-124-4545366 +91-124-4545862
gaurav.singla@icraindia.com nishant.misra@icraindia.com

Relationship Contact
Jayanta Chatterjee
+91 80 4332 6401
jayantac@icraindia.com

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
communications@icraindia.com

Helpline for business queries:

+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)

info@icraindia.com

About ICRA Limited:

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Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited
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For more information, visit www.icra.in

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