CRISIL has upgraded its ratings on the bank facilities of Affordable Robotic and Automation Private Limited (ARAPL) to ‘CRISIL BB-/Stable/CRISIL A4+’ from ‘CRISIL B+/Stable/CRISIL A4’.

The rating upgrade reflects CRISIL’s belief that the business risk profile of the company will continue to improve over the medium term supported by sustenance of revenue growth and operating margin. Operating income grew by 80% fiscal-on-fiscal to Rs 467 million in fiscal 2016 while operating margin improved to 11.3% from 5.8% in the previous fiscal. Revenue growth is expected to continue over the medium term supported by healthy flow of orders from the industrial automation business segment, while revenue from the automated car parking systems is likely to be further ramped up. Healthy revenue growth coupled with a better profitability margin resulted in strengthening of debt protection metrics and also in a better return on capital employed (RoCE). Interest coverage ratio and RoCE improved to 4.14 times and 41.5%, respectively, in fiscal 2016 from 2.71 times and 13.3%, respectively, in the previous fiscal. Cash accrual also increased to Rs 26.9 million from Rs 7.8 million over this period. Sustaining the revenue growth and improved profitability margin, while efficiently managing the working capital cycle, is a key rating sensitivity factor.

The ratings reflect the extensive experience of the promoters in the industrial automation business and their established relationship with customers and suppliers. The ratings also factor in moderate operating efficiency despite the working capital-intensive nature of business. These strengths are partially offset by a below-average financial risk profile because of a modest networth and high total outside liabilities to tangible networth ratio, and susceptibility of operating performance to demand from the key end user, the automotive industry.

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