1. Healthcare

Neel Metal Products Limited
Instrument
Term loans
Fund based & Non-fund
based facilities
Cash Credit/WCDL
Non Fund Based Limits
Unallocated
Commercial Paper/Short
Term Debt
Amount
In Rs. Crore
70.83 (enhanced from
41.72)
45.00 (revised from
108.00)
288.00 (revised from
162.50)
212.00 (revised from
247.00)
7.57 (revised from Rs
24.18)
25.00
Rating
January, 2015
Ratings reaffirmed at [ICRA]A+ (Stable)
Ratings re-affirmed at [ICRA]A+ (Stable)
and [ICRA]A1+
Ratings re-affirmed at [ICRA]A+ (Stable)
and [ICRA]A1+
Ratings re-affirmed at [ICRA]A+ (Stable)
and [ICRA]A1+
Ratings re-affirmed at [ICRA]A+ (Stable)
and [ICRA]A1+
Assigned [ICRA]A1+
ICRA has reaffirmed the ratings of [ICRA]A+/ [ICRA]A1+ (pronounced ICRA A plus/ ICRA A one plus)
for the bank facilities of Neel Metal Products Limited (NMPL) *. The outlook on the long-term rating is
“Stable”. The rated amount is enhanced to Rs. 623.4 Crore from Rs. 583.4 Crore. ICRA also assigned
[ICRA]A1+ (pronounced ICRA A one plus) rating to the Rs 25.0 crore Commercial Paper/ Short Term
Debt Programme of the company.
The rating reaffirmation continues to favourably consider NMPL’s status as one of the key entities in
the automotive industry focused JBM Group, its balanced segment diversification with supplies spread
across passenger vehicle, commercial vehicle, two-wheeler and three-wheeler segments, its healthy
revenue growth over the years and strong cash accruals. NMPL benefits from its technical
collaborations with several Japanese steel makers such as Metal One Corporation and JFE Steel
Corporation that provide technical and systems support for steel service centre (SSC) operations; and
has joint ventures with Arcelor Tailored Blank Lorraine (USA) for tailor welded blanks and with
Kanemitsu (Japan) for making pulleys. These partnerships are expected to allow NMPL continue to
maintain strong business position with various customers. NMPL registered a healthy revenue growth
in 2013-14 on account of new business from Group companies and ramp-up in supplies to other key
customers, namely Honda Motorcycle and Scooter India (HMSI), Mahindra & Mahindra (M&M), etc.
NMPL’s cash accruals at around Rs. 90 Crore over the last two years have also remained strong;
however, in 2013-14, NMPL’s dividend payout increased to Rs. 16.4 Crore from Rs. 2.0 Crore in 201213.
The ratings of NMPL are, however, constrained by NMPL’s high client concentration risk, and rising
investments in subsidiaries, joint ventures and group companies. The company faces high client
concentration risk, being predominantly dependent on the JBM group of companies, especially Jay
Bharat Maruti Limited (JBML) (rated [ICRA]A+/Stable/[ICRA]A1+) which further supplies body-in-white
and chassis parts to Maruti Suzuki India Limited (MSIL). This risk, however, is partly mitigated on
account of the status of JBML as a key supplier to MSIL, which has a leadership position in the
domestic passenger vehicle industry. As of March 31, 2014, NMPL’s total investments in various
subsidiaries, joint ventures and group companies stood at Rs. 304.6 Crore (Rs. 168.5 Crore as on
March 31, 2012) which was 68% of its tangible net worth. While a majority of the above investments
are in entities in the automotive space, around one-quarter are in unrelated business areas including
environment management, education and real estate. Although several of these investments are
dividend yielding, their cumulative return currently remains much lower than that from core operations.
The quantum of NMPL’s investments, going forward, and its impact on the company’s Return on
Capital Employed (RoCE) and credit metrics will be a key monitorable. Also, ICRA notes that NMPL
*
For complete rating scale and definitions, please refer to ICRA’s website www.icra.in or other ICRA Rating
Publications.
has incurred a cumulative capital expenditure of almost Rs. 300 Crore over the last three years,
causing an increase in long-term debt to Rs. 178.4 Crore as on March 31, 2014 from Rs. 88.5 Crore as
on March 31, 2012. While this exerted pressure on NMPL’s credit metrics with Total Debt/ OPBITDA
deteriorating to 2.8x as on March 31, 2014 from 1.7x as on March 31, 2012, we expect the company’s
credit metrics to remain healthy in the near term given the moderate capex plans. ICRA also notes that
some part of NMPL’s long-term funding requirements are currently being met through short-term
borrowings reflected in current ratio being less than 1.0 times as on March 31, 2014. However, ICRA
expects the same to correct going forward on the back of growth in internal accruals.
Going forward, NMPL’s credit rating will remain sensitive to the quantum of its investments in various
subsidiaries, joint ventures and group companies, besides alteration in mix of long-term and short-term
debt.
Recent results
In 6m, FY15 (provisional), NMPL reported net sales of Rs. 874.8 crore and Profit before Depreciation,
Interest and Tax of Rs. 101.9 crore.
Company Profile
Incorporated in 1997, Neel Metal Products Limited is a part of the JBM Group of companies and is
privately held and promoted by Mr. S.K. Arya and affiliates. NMPL’s manufacturing facilities are
located at Gurgaon, Haridwar, Pantnagar, Manesar and Bangalore, each of which is in close proximity
to the facilities of the company’s major customers. The facility at Gurgaon operates as an Steel
Service Center (SSC), besides manufacturing components and tools. The facility at Haridwar
manufactures complete welded and painted bodies for three-wheelers for Mahindra & Mahindra
(M&M), the plant at Pantnagar manufactures ERW (Electric Resistance Welded) and CDW (Cold
Drawn Welded) tubes, and the unit at Manesar is engaged in the manufacture of automotive welded
assemblies for two wheelers. The newly set-up Bangalore facility became operational in 2013-14 and
supplies to Honda Motorcycle and Scooter India (HMSI).
The customers of the company include Jay Bharat Maruti Limited (JBML) and several other JBM
Group companies, HMSI, M&M, and Tier 1 suppliers to companies including Maruti Suzuki India
Limited and Honda Cars India Limited. NMPL has technical collaborations with several foreign
companies such as Metal One Corporation (Japan), JFE Steel Corporation (Japan) and JVs with
Arcelor Tailored Blank Lorraine (USA), Sumitomo Corporation (Japan), Nisshin Steel Company Limited
(Japan), Kanemitsu Group (Japan) and Fanalca S.A (Colombia).
January 2015
For further details please contact:
Analyst Contacts:
Mr. Sabyasachi Majumdar (Tel. No. +91 124 4545304)
[email protected]
Relationship Contacts:
Mr. Vivek Mathur (Tel. No. +91-124-4545310)
[email protected]
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