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Bharat Electronics Ltd. Capital/Financing Update 2022
60828_rns_2022-01-21_c1247dae-a0a6-4de6-b87d-a5f24674b784.pdf
Capital/Financing Update
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प्रतिष्ठा में/ To, बीएसई लि. / BSE Ltd. फिरोज जीजीबॉय टावर्स/ Phiroze Jeejeebhov Towers दलाल स्टीट/ Dalal Street मंबई/ Mumbai - 400 001
सं .No. 17565/4/SE/MUMC/SEC दिनांक / Date: 21.01.2022
महोदय / महोदया. Dear Sir/Madam,
विषय: क्रेडिट रेटिंग की सूचना। Sub: Intimation of Credit Rating.
भारत इलेक्ट्रॉनिक्स BHARAT ELECTRONICS भारत इलेक्ट्रॉनिक्स लिमिटेड (भारत सरकार का उद्यम, रक्षा मंत्रालय) पंजीकत कार्यालय : आउटर रिंग रोड, नागवारा, बेंगलूर - 560 045, भारत Bharat Electronics Limited (Govt. of India Enterprise, Ministry of Defence) Registered Office : Outer Ring Road. Nagavara, Bangalore - 560 045, INDIA. CIN: L32309KA1954GOI000787 टेलीफैक्स/Telefax: +91 (80) 25039266 ई-मेल/E-mail : [email protected] वेब/Web : www.bel-india.com
सेबी (एल.ओ.डी.आर.) विनियम, 2015 के विनियम 30 के तारतम्य में, आपको सूचित किया जाता है कि आई.सी.आर.ए. (क्रेडिट रेटिंग एजेंसी) ने कंपनी की निम्नलिखित क्रेडिट रेटिंग की पन:पष्टि की है -Pursuant to Regulation 30 of SEBI (LODR) Regulations, 2015, we inform that ICRA (Credit Rating Agency) has reaffirmed the following credit ratings of the Company:
- (i) [आईसीआरए] एएए (जिसे आईसीआरए ट्रिपल ए कहा जाता है) की क्रेडिट एवं दीर्घकालीन रै 500 करोड़ की निधि आधारित सीमा- ₹ 300 करोड़ के लिए अनाबंटित। Long-term rating of [ICRA]AAA (pronounced ICRA triple A) to Rs.500 crore fund based limits of credit and long term - unallocated to Rs.300 crore.
- (ii) [आई.सी.आर.ए.]ए1+ (जिसे आई.सी.आर.ए ए वन प्लस कहा जाता है) की अल्पकालीन रेटिंग की क्रेडिट की रु. 4.500 करोड की गैर-निधि आधारित सीमा। Short-term rating of [ICRA]A1+ (pronounced ICRA A one plus) to Rs.4,500 crore non-fund based limits of credit.
दीर्घकालीन रेटिंग की दृष्टि 'स्थिर' है। ये रेटिंग दीर्घकाल और अल्पकाल में सर्वोच्च क्रेडिट गणता दर्शाती हैं। इन वर्गों में श्रेणीकृत विलेखों में दीर्घकाल और अल्पकाल में निम्नतम क्रेडिट जोखिम होते हैं। ये रेटिंग 10 जनवरी, 2023 तक वैध हैं।
The outlook on the long-term rating is 'Stable'. These ratings indicate the highest credit quality in the long- and short-term. The instruments rated in these categories carry the lowest credit risk in the long- and short-term. These ratings are valid till 10th January, 2023.
आपके संदर्भ हेतु आई.सी.आर.ए. द्वारा जारी रिपोर्ट की प्रति संलग्न है। We enclose copy of the report issued by ICRA for your reference.
सूचना व अभिलेख हेतु। This is for your information and record.
सधन्यवाद / Thanking you,
भवदीय Yours faithfully,
कृते भारत इलेक्ट्रॉनिक्स लिमिटेड/ For Bharat Electronics Limited
एस श्रीनिवास/ S Sreenivas कंपनी सचिव/ Company Secretary
संलग्न- यथा उपरोक्त। Encls: As stated above.
ICRA ICRA Limited
Ref: ICRA/Bharat Electronics Limited/14012022/1
Date: January 14, 2022
Mr. S Damodar Bhattad General Manager (Finance), Bharat Electronics Limited, Outer Ring Road, Nagavara, Bangalore - 560 045
Dear Sir,
Re: ICRA-assigns Credit Rating for Rs. 5,300 crore (enhanced from Rs. 4,300 crore) Line of Credit of Bharat Electronics Limited (instrument details in Annexure)
Please refer to the RRF dated February 4, 2019 and Rating Agreement dated February 7, 2019 executed between ICRA Limited ( " ICRA") and your company, whereby ICRA is required to review the ratings assigned to your company, on an annual basis, or as and when the circumstances warrant. Also, please refer to your SOW dated December 13, 2021 seeking an enhancement of the captioned Line(s) of Credit (LOC) of your company from Rs. 4,300 crore to Rs. 5,300 crore.
Please note that the Rating Committee of ICRA, after due consideration, has reaffirmed the long term rating at [ICRA]AAA (pronounced ICRA triple A) and short term rating at [ICRAJA1 + (pronounced ICRA A one plus) assigned earlier to the Rs. 4,300 crore Line of Credit of your Company, and also assigned a short-term rating of [ICRAJA1+ (pronounced ICRA A one plus) to the additional limit of Rs. 1,000 crore. The Outlook on the long term rating is Stable.
Instruments with [ICRAJAAA rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk. In any of your publicity material or other document wherever you are using the above Rating(s), it should be stated as [ICRA]AAA (Stable)/[ICRA]A1 +
The aforesaid Rating(s) will be due for surveillance any time before January 10, 2023. However, ICRA reserves the right to review and/or, revise the above Rating(s) at any time on the basis of new information becoming available, or the required information not being available, or other circumstances that ICRA believes could have an impact on the Rating(s). Therefore, request the lenders and Investors to visit ICRA website at www.icra.in for latest Rating(s) of the Company.
The Rating(s) are specific to the terms and conditions of the proposed issue as indicated to us by you, and any change in the terms or size of the same would require a review of the Rating(s) by us. In case there is any change in the terms and conditions or the size of the issue, the same must be brought to our notice before the issue is used by you. In the event such changes occur after the Rating(s) have been assigned by us and their use has been confirmed by you, the Rating(s) would be subject to our review, following which there could be a change in the Rating(s) previously assigned Notwithstanding the foregoing, any change in the over-all limit of the issue from that specified in the first paragraph of this letter would constitute an enhancement that would not oe covered by or under the said Rating Agreement.
The Rating(s) assigned must be understood solely as an opinion and should not be treated, or cause to be treated as recommendation to buy, sell, or hold the rated instruments availed/issued by your company.
You are also requested to forthwith inform us about any default or delay in repayment of interest or principal amount of the instrument rated, as above, or any other debt instruments/ borrowing and keep us informed of any other developments which may have a direct or indirect impact on the debt servicing capability of the company including any proposal for re-schedulement or postponement of the repayment programmes of the dues/ debts of the company with any lender(s) I investor(s). Further, you are requested to inform
FMC Fortuna, A-10 & 11, 3'" Floor Tel : +91 33.71501100 Website : www.icra.in 234/3A, A.J.C. Bose Road CIN : L74999DL1991PLC042749 Email : [email protected] Kolkata - 700020 Helpdesk +91.124.3341580 Registered Office : 1105, Kailash Building, 11" Floor, 26 Kasturba Gandhi Marg, New Delhi - 110001. Tel. +91.11.23357940-45 RATING - RESEARCH . INFORMATION
us immediately as and when the borrowing limit for the instrument rated, as above, or as prescribed by the regulatory authority(ies) is exceeded.
We look forward to your communication and assure you of our best services
With kind regards, Yours sincerely,
Digitally signed bySUJOY SAHA Date: 2022.01.14 14:37:14 +05'30,
FMC Fortuna,A-10 & 11, 3'° Floor Tel. : +91.33.71501100 Website :www.icra.in 234/3A. A.J.C. Bose Road CIN : L74999DL1991PLC042749 Email : [email protected] Kolkata - 700020 Helpdesk: +91.124.3341580 Registered Office : 1105, Kailash Building, 11"' Floor, 26 Kaslurba Gandhi Marg, New Delhi - 110001. Tel. : +91.11.23357940-45 RATING . RESEARCH . INFORMATION
ICRA ICRA Limited
| -ICRAEnd:AnnexureDetails of Bank Limits Rated by ICRA (Rated on Long-Term Scale) | LiImiteCRAd | |
|---|---|---|
| Bank Name | Amount in Rs. crore | Rating Outstanding |
| Long-term Fund based | ||
| State Bank of India | ||
| Canara Bank | ||
| IDBI Bank | ||
| Bank of Baroda | [ICRA]AAA (Stable) | |
| Union Bank of India | ||
| Punjab National Bank | , | |
| Bank of India | 500.00 | |
| ICICI Bank | ||
| Axis Bank | ||
| HDFC Bank | ||
| Kotak Mahindra Bank | ||
| Induslnd Bank | ||
| Yes Bank | ||
| Long-term Unallocated | ||
| Unallocated | 300.00 | |
| Total | 800.00 | |
Details of Bank Limits Rated by ICRA (Rated on Short-Term Scale)
| Bank Name | Amount in Rs. crore | Rating Outstanding |
|---|---|---|
| Non-Fund Based Facilities | ||
| State Bank of India | ||
| Canara Bank | ||
| IDBI Bank | ||
| Bank of Baroda | [ICRAJA1 + | |
| Union Bank of India | ||
| Punjab National Bank | ||
| Bank of India | 4,500.00 | |
| ICICI Bank | ||
| Axis Bank | ||
| HDFC Bank | ||
| Kotak Mahindra Bank | ||
| Induslnd Bank | ||
| Yes Bank | ||
| Total | 4,500.00 |
| 234/3A, A.J.C. Bose Road | CIN . L74999DL1991PLC042749 | : [email protected]Email |
|---|---|---|
| Kolkata - 700020 | HelpcJesk : +91.124,3341580 |
FMC Fortuna, A-10 & 11, 3'° Floor Tel : +91.33.71501100 Website www.icra in
Registered Office : 1105, Kailash Building, 11°' Floor, 26 Kasturba Gandhi Marg, New Delhi - 110001. Tel. : +91.11.23357940-45 RATI WG - RESEARCH . INFORMATION
January 14, 2022 i,f"i&ff
Bharat Electronics Limited: Ratings reaffirmed; rated amount enhanced
Summary of rating action
| Instrument'* | RatedAmountPrevious(Rs. crore) | RatedCurrentAmount(Rs. crore) | RatingAction |
|---|---|---|---|
| Long-termFund based | 500.00 | 500.00 | : ICRA]AAA (Stable); reaffirmed |
| Long-termUnallocated | 300.00 | 300.00 | [ICRAjAAA(Stable);reaffirmed |
| Short-termNon-fundbased | 500.003, | 500.004, | [ICRA]A1+; reaffirmed |
| Total | 300.004, | 300.005, |
Instrument details ore provided in Anrexwe-1
Rationale
The ratings reaffirmation draws comfort from Bharat Electronics Limited's (BEL) strategic position as a dominant supplier of electronic equipment to the Indian defence forces. BEL is majority owned by the Government of India (GOI) and is a Navratna defence public sector undertaking (DPSU), which leads to a sizeable inflow of orders on a nominated basis. The assigned ratings consider the strong order pipeline with unexecuted order book worth Rs. 54.372 crore as on November 1, 2021. This translates into a trailing order-book-to-operating-income ratio of 3.9 times (based on FY2021 operating income), providing adequate revenue visibility in the medium term. Moreover, BEL s fresh order addition pipeline remains healthy, supported by the Government's focus on rolling out enabling reforms to increase India's defence product manufacturing capability and gradually reduce imports. Though competition from the private sector is likely to intensify in the medium to long term, BEL's established track record and large manufacturing capacities with adequate pool of trained manpower and research and development (R&D) capabilities will continue to be strong mitigating factors. ICRA notes that BEL's consistent investment towards R&D has helped create a strong competitive moat by giving it the ability to develop latest generation products and services and gradually increasing the indigenisation of its product offering, which have been the key pillars behind the company's healthy profit margins. BEL has a strong financial risk profile, characterised by healthy profit margins and return indicators, nil borrowings and a superior liquidity profile.
These strengths are offset to some extent by BEL's continued high dependence or the defence secic. which contributes to the bulk of its revenues and its working capital-intensive nature of operations due to high receivables and unbilled revenues on account of long gestation periods for the orders executed. ICRA also notes that BELs operating profit margins remain vulnerable to input cost fluctuations in its fixed price defence contracts, lower profitability in certain segments and high level of cost overheads.
The Stable outlook reflects ICRA's expectation that BEL will continue to benefit from its strategic importance as the major supplier of defence electronics equipment to the Indian defence forces and the high sectoral entry barriers, which would limit competition.
Key rating drivers and their description
Credit strengths
Defence Navratna PSU and a dominant supplier of electronic equipment to Indian defence forces - BEL is a defence PSU. with the GOI holding a 51.14% equity stake as or September 30, 2021. The company is of strategic importance to the GOI as it is the dominant domestic supplier of defence electronics equipment to the Indian defence forces. Further, BEL,s status as
the largest domestic electronics manufacturer leads to benefits associated with the economies of scale. In addition, Government ownership leads to a sizeable inflow of orders or a nominated basis, providing a steady earnings stream to the company.
Strong pending order book provides adequate revenue visibility - The company's unexecuted order book as on November 1, 2021 stood at Rs. 54,372 crore. The order book stands at 3.9 times of the FY2021 operating income, which provides adequate revenue visibility in the medium term. Additionally, the Government s focus on rolling out enabling reforms to increase India s defence product manufacturing capability and gradually reduce imports will support the order inflow in the medium-to-long term.
Strong financial profile with healthy profitability and low leverage - BEL's financial profile remains strong because of healthy profitability and return indicators, nil borrowings, superior liquidity and strong debt coverage metrics. The company reported an operating income of Rs. 14,109 crore in FY2021. Despite weak Q1 FY2022 performance due to the second wave of the pandemic, BEL s FY2022 revenues are expected to exceed FY2021 levels on the back of healthy order execution in H2 FY2022. iCRA also notes that the increasing indigenisation would support healthy profit margins, going forward.
Competitive advantage due to high entry barriers 3EL continues to enjoy advantage over its competitors cue to its dominar: market position, proven track record and association with the armed ; orces. established ir < rastructure anc manuf acturing facilities, along with strong R&D capabilities.
Credit challenges
High dependence on defence sector for orders - The Indian defence sector is BEL's major customer, accounting for "80% of the turnover. In case of any changes in the procurement policy of the defence forces or a significant cutback in defence spending, the company s revenue and order book position can be adversely impacted. Due to the high concentration of the Government sector orders, BEL,s revenue booking and cash flows are vulnerable to delays in project execution or final payment clearance in some cases. BEL is targeting to increase the share of non-defence revenues to 25% over the medium term to reduce business risk. In addition, BEL is planning to increase its export footprint by targeting higher defence equipment exports to friendly countries, which can reduce its over-reliance on the domestic defence business.
Working capital intensive nature of operations - BEL s working capital intensity had remained elevated in the past due to high receivables and unbilled revenues on account of long gestation periods for the orders executed. Nonetheless, the company has been able to manage its working capital requirements through its internal cash accruals and sizeable customer advances.
Liquidity position: Superior
The liquidity profile of BEL is superior, supported by comfortable cash flow from operations, which are expected tj be adequate to meet the capital expenciture outlay and dividend outflows. The company had cash and bank balance of more than Rs. 5,000 crore as on September 30, 2021. The company also has sanctioned and unutilised fund-based borrowing facilities of Rs. 500 crore. Given the low leverage, the company would be able to access additional bank borrowings for capital expenditure or working capital requirements, if required.
Rating sensitivities
Positive factors - Not applicable.
Negative factors - The ratings can be downgraded if there is any significant stretch in the receivable cycle of the company due to delay in payments by customers or a change in the strategic importance of BEL to the GOI, reflecting in lower order inflows and revenues. Specific credit metrics include increase in Total Debt/OPBITDA to more than 0.5 times on a sustained basis.
Analytical approach
| AnalyticalApproach | Comments' |
|---|---|
| Applicable RatingMethodologies | Credit RatingCorporateMethodoloRV |
| RatiniApproach - Impl ctparent o' group support | |
| Parent:Government of India | |
| strategicThe assigned ratingsfactor in theimportancethatBEL holds by being the | |
| Parent/GroupSupport | largest domesticmanufacturer,defence electronicswhich ICRA expectsshould |
| rated entity,should thereinduce theGOI to extendtimelyfinancialsupport tothe | |
| be a need. | |
| theratings,For arrivingat theICRA has consiceredconsolidated Financials of BEL. | |
| Consolidation/Standalone | As on March 31, 2021, thecompany had twosubsidiaries and one associatethat |
| are enlistedin Annexure-2. |
About the company
BEL, a Navratna defence public sector undertaking (DPSU), was established in 1954 under the Ministry of Defence, the GOI, to cater to the electronic equipment requirements of the defence sector. The GOI remains BEL' s largest shareholder with the current shareholding of 51.14%. BEL was conferred the Navratna PSU status in June 2007,
BEL is the dominant supplier of radar, communication and electronic warfare equipment to the Indian armed forces. The company has nine manufacturing units across India and two research units. The Bangalore and the Ghaziabad units are BEL' s two major units, with the former contributing the largest share to the company's total revenue and profits.
Key financial indicators
| flnancialsConsolidated(Ind AS) | FY2020 (Audited) | FY2021 (Audited) | HIFY2022(Provisional) |
|---|---|---|---|
| OperatingIncome (Rs. crore) | 12,967.7 | 14,108.7 | 326.75, |
| PAT (Rs. crore) | 824.71, | 099.82, | 623.1 |
| OPBDIT/OI (%) | 21.2% | 22.8% | 17.5% |
| PAT/OI(%) | 14.1% | 14.9% | 11.7% |
| Liabilities/TangibleNet WorthTotalOutside(times) | 1.3 | 1.6 | NA |
| Debt/OPBDITTotal(times) | 0.0 | 0.0 | NA |
| Coverage (times)Interest | 765.1 | 504.0 | 1506.5 |
Source: Company; P - Provisional; PA T: Pfofit after Tax; OPBDIT: Operating Profit before Depreciation, Interest, Taxes and Amortisation: Source: BEL
Status of non-cooperation with previous CRA - Not Applicable
Any other information: None
Rating history for past three years
| CurrentRating(FY2022) | Chronology ofRatingHistoryforthepast3 years | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Instrument | Type | AmountRated | AmountOutstanding | Date& RatinginDate & RatinginFY2021 | & RatingDate& RatingDateininFY2020FY2019 | ||||
| Jan 14, 2022 | Feb 17, 2021 | Feb 17, 2020 | Feb 15, 2019 | ||||||
| 1 | Fund-based | LT | 500.0 | [ICRA]AAA (Stable) | [ICRAJAAA (Stable) | (ICRA)AAA (Stable) | [ICRA1AAA(Stable) | ||
| 2 | Unallocated | LT | 300.0 | [ICRAjAAA(Stable) | [ICRAiAAA (StaDie) | (ICRA)AAA (Stable) | (,CRA'AAA(Stable) | ||
| Non-fund | ST | 4,500.0 | [ICRAJA1+ | [ICRA1A1+ | (ICRA]A1+ | (ICRAJA1+ |
Amount in Rs. crore. LT - Long Term; ST - Short Term
Complexity level of the rated instrument
| Fund-based | Simple |
|---|---|
| unallocated | Not applicable |
| Non-fund based | Very Simple |
The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated. It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument , s credit rating. It also does not indicate the complexity associated with analyzing an entity s financial, business, industry risks or complexity related to the structural, transactional, or legal aspects. Details on the complexity levels of the instruments, is available on ICRA' s website: www.icra.ir
Annexure-1: Instrument details
| ISIN No/BankName | InstrumentName | Dateof Issuancei/onSanc | CouponRate | iMatutyDate | AmountRated(RSCrore) | Current Ratingand Outlook |
|---|---|---|---|---|---|---|
| State Bank of India | ||||||
| Canara Bank | ||||||
| IDBI Bank Limited | ||||||
| Bank of Baroda | ||||||
| Union Bank of fndia | ||||||
| Punjab National Bank | ||||||
| Bank of India | Fund-based | (ICRAjAAA (Stabie) | ||||
| ICICI Bank Limited | ||||||
| Axis 3ank Limited | ||||||
| HDFC Bank Limited | ||||||
| KotakMahindra Bank Limited | ||||||
| Induslnd Bank Limited | ||||||
| YES Bank Limited | ||||||
| Not applicable | Unallocated | [ICRAjAAA (Stabie) | ||||
| StateBank of India | ||||||
| Canara Bank | ||||||
| IDBI Bank Limited | ||||||
| Bank of Baroda | ||||||
| Union Bank of fndia | ||||||
| Punjab National Bank | ||||||
| 3ank of India | Non-fund based | [ICRAJA1 + | ||||
| iGCI Bank Limited | ||||||
| Axis Bank Limited | ||||||
| HDFC Bank Limited | ||||||
| KotakMahindra Bank Limited | ||||||
| Induslnd Bank Limited | ||||||
| YES Bank Limited |
Annexure-2: List of entities considered for consolidated analysis
| Company Name | BEL Ownership | Consolidation Approach |
|---|---|---|
| BEL Optronic Devices Ltd. | 100.00% | Pull Consolidation |
| BEL - Thales SystemsLtd. | 74.00% | fU,,Consolidation |
| GE BE Private Limited | 26.00% | Equity Method |
| Source: BEL annua! report FY2021; ICRA has taken a consolidated view ofthe | parent (BEL), its subsidiaries and associates while assigning the ratings |
Corrigendum
Document dated January 14, 2022, has been corrected with revisions as detailed below -
Section related to instrument details on page number 5: Lender details have been included in Annexure-1 instead of the hyperlink which directed to the lender detail page.