By Anish Shetty

India Ratings and Research (Ind-Ra) has assigned Samkwang India Electronic Private Limited (SIEPL) a Long-Term Issuer Rating of ‘IND BB’. The Outlook is Stable. The instrument-wise rating actions are as follows:

Instrument Type

Date of Issuance

Coupon Rate

Maturity Date

Size of Issue (million)

Rating/Outlook

Rating Action

Fund-based limit

-

-

-

INR 250

IND BB/Stable/IND A4+

Assigned

Term loan

-

-

April 2024

INR 350

IND BB/Stable

Assigned


KEY RATING DRIVERS

The ratings reflect the nascent stage of SIEPL’s operations as the company started production only in May 2021; the operations were to start earlier but got delayed due to COVID-19-led disruptions. The company had booked sales of INR787.63 million at end-August 2021. The management expects to earn a revenue of around INR6,000 million in FY22. The company had an order book of around INR80 million at end-September 2021 to be executed by end-December 2021. While execution risk exists, it is partially offset by the fact that all the key decisions are taken by the board of SIEPL after consulting the respective global division heads of the South Korea-based parent company Samkwang Wintech Co. Ltd. The Indian manufacturing unit is one of the seven global units of the Samkwang Group, set-up under the established technical expertise of the parent.  However, SIEPL is the  first vendor company of the Samsung Group which helps it receive running orders from the group.

In FY22, Ind-Ra expects the EBITDA margin to be modest given it will be the first year of operations. However, once the operations stabilise over the long term, the EBITDA margin will improve with reduced operating leverage. In FY22, Ind-Ra expects the credit metrics to be modest, given the significant debt availed by SIEPL during the year. The company availed an external commercial borrowing to the extent of INR1,746.83 million from Samkwang Wintech over FY19-FY20 and a term loan of INR604 million in FY21for land acquisition and leasehold improvement. The external commercial borrowing is payable after 10 years (interest is paid on quarterly basis). In FY22 the company further availed a term loan to the tune of INR350 million for capital expenditure and fund-based limits to the extent of INR250 million to meet the working capital requirements. Over the long term, Ind-Ra expects the credit metrics to improve on the back of improved absolute EBITDA and debt repayments.

Liquidity Indicator - Stretched: Ind-Ra expects the cash flow from operations to be negative in FY22, since it is the first full year of the company’s operations and SIEPL will need funds to meet its working capital requirements. The free cash flow is also likely to be negative in FY22 on back of significant capex incurred during the year, which is being funded by term loan of INR450 million and equity infusion of INR2,125 million. 

The ratings are, however, supported by around two decades of expertise of the parent company in the electronic industry and having Samsung India Electronics Private Limited as its counterparty.


RATING SENSITIVITIES

Positive: A sustained improvement in the revenue, margins and working capital cycle, leading to the net leverage below 4x, on a sustained basis, could lead to a positive rating action.

Negative: A lower-than-expected scale of operations leading to deterioration in the credit metrics with the net leverage above 5.5x and/or a weakening of liquidity can lead to a negative rating action.


COMPANY PROFILE

Incorporated on 3 January 2018, SIEPL is promoted by Sungje Cho and Sung Gon Ryu. Its major stake is held by a Korean entity named Samkwang Wintech. The plant is based in Greater Noida (Uttar Pradesh). Samkwang is first vendor company for the Samsung Group and it is engaged in moulding, assembling and paint job for Samsung Electronics Co.

FINANCIAL SUMMARY

Financial summary is not available as the company began its operation in FY22.



COMPLEXITY LEVEL OF INSTRUMENTS

Instrument Type

Complexity Indicator

Fund-based working capital limits

Low

Term loan

Low

 

For details on the complexity levels of the instruments, please visit https://www.indiaratings.co.in/complexity-indicators.
 

SOLICITATION DISCLOSURES

Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings. 

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

ABOUT INDIA RATINGS AND RESEARCH

About India Ratings and Research: India Ratings and Research (Ind-Ra) is India's most respected credit rating agency committed to providing India's credit markets accurate, timely and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India's fixed income market. 

Ind-Ra currently maintains coverage of corporate issuers, financial institutions (including banks and insurance companies), finance and leasing companies, managed funds, urban local bodies and project finance companies. 

Headquartered in Mumbai, Ind-Ra has seven branch offices located in Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Pune. Ind-Ra is recognised by the Securities and Exchange Board of India, the Reserve Bank of India and National Housing Bank. 

India Ratings is a 100% owned subsidiary of the Fitch Group.

For more information, visit www.indiaratings.co.in.

DISCLAIMER

ALL CREDIT RATINGS ASSIGNED BY INDIA RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.INDIARATINGS.CO.IN/RATING-DEFINITIONS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.INDIARATINGS.CO.IN. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. INDIA RATINGS’ CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE.

Applicable Criteria

Analyst Names

  • Primary Analyst

    Anish Shetty

    Senior Research Associate
    India Ratings and Research Pvt Ltd Wockhardt Towers, 4th Floor, West Wing, Bandra Kurla Complex, Bandra East,Mumbai - 400051
    +91 22 40001700

    Media Relation

    Ankur Dahiya

    Manager – Corporate Communication
    +91 22 40356121