PG Electroplast Limited - 'CRISIL A- / Stable / CRISIL A2+ ' assigned to Bank Debt

CRISIL Ratings has assigned its 'CRISIL A-/Stable/CRISIL A2+' ratings to the bank facilities of PG Electroplast Limited (PGEL, part of the PG group).

The ratings reflect the group's established market position in plastic moulding component business. The group is one of the leading contract manufacturers/vendors for air conditioners (ACs), washing machines and other plastic moulded components for white goods. It has a diversified clientele across most popular white goods brands such as Carrier Midea, Voltas, LG India, Whirlpool, Reliance Digital, Onida, Godrej and Acer. The group reported healthy compound annual growth rate of 22% in operating revenue over the five fiscals through fiscal 2021, backed by continuous addition of customers (original equipment manufacturers), product diversification, capital expenditure (capex) and in-house research and development.

Operating revenue is expected to improve by more than 50% over the medium term with operating margin of 7.5-8.5%, supported by operationalisation of new plant in Supa, Maharashtra (under subsidiary of PGEL, PG Technoplast Pvt Ltd (PGTPL) with capacity of 1,500,000 indoor units and 1,000,000 outdoor units for ACs, 800,000 units of washing machines and other components. PGTL qualified under the production-linked incentive (PLI) scheme for white goods (ACs and LED lights) in November 2021. Under this scheme, PGTL is entitled to Rs 198 crore of PLI incentives over a period of five years based on Rs 321 crore of committed capital investment till fiscal 2027. Investments under the PLI scheme will be done at the Supa and Noida plants. PGTL has been approved with the third-highest investment in the white goods segment. The plant will commence production from December 2021, leading to significant increase in revenue from the fourth quarter of fiscal 2022. Timely commercialisation of the new unit and ramp-up of operations will be a key monitorable.

The ratings also factor in improvement in the group's financial risk profile driven by capital infusion of Rs 76.7 crore by the private equity (PE) fund, Baring Private Equity India AIF (Baring), and Ananta Capital in fiscal 2022. Therefore, the capital structure should remain healthy, with gearing expected at 1.12 times as on March 31, 2022, as against 1.02 times a year earlier. The funds will improve the ability to meet incremental working capital and capex requirements without raising significant additional debt. Baring acquired a minority stake in PGEL in May 2022 through a mix of preferential allotment of shares and compulsorily convertible debentures, which will be converted into equity by October 2022.

The ratings reflect the group's established position and the promoters' extensive experience in manufacturing plastic components for the consumer durable goods industry, healthy product diversity along with well-established clientele and comfortable financial risk profile. These strengths are partially offset by exposure to intense competition in the consumer electronics segment, vulnerability to cyclicality in end-user industry and large working capital requirement.

Shares of PG Electroplast Limited was last trading in BSE at Rs. 648.90 as compared to the previous close of Rs. 598.10. The total number of shares traded during the day was 29180 in over 2796 trades.

The stock hit an intraday high of Rs. 674.00 and intraday low of 599.90. The net turnover during the day was Rs. 19034457.00.

Source : Equity Bulls

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PGElectroplastLimited INE457L01011 PGEL RatingUpdate