ISGEC Hitachi Zosen Limited

ISGEC Hitachi Zosen Limited
Instrument Details
Fund Based Limits
Non Fund Based Limits
Proposed Bank Facilities
Amount in Rs. Crore^
20.00
65.00
10.00
Rating Action
March 2014
[ICRA]BBB- (stable) assigned
[ICRA]A3 assigned
[ICRA]A3 assigned
ICRA has assigned the rating of [ICRA]BBB- (pronounced ICRA triple B minus) on the long term scale
and [ICRA]A3 (pronounced ICRA A three) on the short term scale to Rs. 20.00 crore fund based limits,
Rs. 65.00 crore non fund based limits and Rs. 10.00 crore proposed bank facilities of ISGC Hitachi
Zosen Limited (IHZL)†. The outlook on the long term rating is ‘Stable’.
The assigned ratings take into consideration the nascent stage of operations of IHZL, which was
incorporated in March 2012. The company has a working capital intensive nature of operations on
account of its long manufacturing cycle (typically around 18 months); due to which it did not book
revenues for most orders received post H1 FY 2013 by March 31, 2014. Thus, IHZL’s revenues and
profitability have remained subdued for its first two years of operations. The ratings also factor in
exposure to execution risks with the company currently in process of expanding the manufacturing
capacity of its facility at Dahej, Gujarat. Further, the ratings are constrained by competitive pressures
from both domestic and international players, exposure of the company’s profitability to foreign
exchange variation with regard to its exports orders and to fluctuations in the prices of key raw
materials (given the fact that equipment supply contracts are typically of fixed price nature). Also,
cyclical trends in consuming industries may affect future order inflows, although this risk is partly
mitigated by the geographical diversification of the company’s order book.
Nevertheless, the assigned ratings derive strength from the established position of the company’s
shareholders ISGEC Heavy Engineering Limited (IHEL) (Rated [ICRA]AA-(stable)/[ICRA]A1+) and
Hitachi Zosen Corporation (HZC), and the support extended by them in areas of design, technology,
manpower and bidding/marketing. ICRA also factors in the company’s healthy order book (Rs. 434
crores as on December 31, 2013),sufficient geographical diversification with export orders comprising
over 65% of its current order book; and locational advantage of being a port based facility which would
enable it to manage its working capital cycle and logistics more efficiently. The ratings also favourably
factor in an irrevocable and unconditional corporate guarantee from IHEL covering Rs. 25 crore bank
facilities and USD 6 million ECB availed by the company from Standard Chartered Bank.
Company Profile
ISGEC Hitachi Zosen Limited (IHZL) is a Joint Venture (JV) incorporated in March 2012 with an equity
share capital of Rs. 100 crore. IHZL has a 51% shareholding of ISGEC Heavy Engineering Limited
(IHEL), India and 49% shareholding of Hitachi Zosen Corporation (HZC), Japan. The JV is engaged in
the manufacturing of specialized & critical process equipments and caters to the requirements of oil
refining, fertilizer & petrochemical industries.
IHZL benefits from the technological capability and customer base of its shareholding entities, IHEL
and HZC, which are also responsible for the bidding/marketing function of the company. ISGEC Heavy
Engineering Limited (IHEL) has leased its manufacturing facility at the port city of Dahej, Gujarat to the
JV. IHZL is currently in process of expanding the manufacturing capacity of the facility at Dahej from
current 8,000 MT/year to 13,000 MT/year; with expected completion by June 2014. A brief outline of
the capacity expansion is as follows:
^ 100 lakh = 1 crore = 10 million
† For complete rating scale and definitions, please refer to ICRA's website www.icra.in or other ICRA Rating
Publications
Proposed Facility
2 cranes x 250 tons each
2 cranes x 25 tons each
Boring machine
Turning rollers
Welding Machines
Capacity (MT)
500 MT
50 MT
4.5 x 10 meters
1 x 1,000 tons; 2 x 600 tons, 7 x 200 tons
72 Nos
The company’s product profile includes Tubular reactors, GTL reactors, Hydroprocessing reactors,
Coke drums, CCR reactors, Tertiary separators, Feed gas reactors, Thick pressure vessels, Tall
columns, Urea reactors, Urea strippers and Ammonia converters. A brief overview of the infrastructure
at the company’s manufacturing facility in Dahej is as follows:
Manufacturing Facility
Cold Rolling Machine
Linear Accelerator for radiography
Inside Shop Handling Capacity
Automatic weld overlay nozzles
Deep Hole Gun Drill Machine
Capacity/Rating
250mm
6 MeV
Up to 1000 MT & 10 m diameter
2” I.D.
Up to 1000 mm depth
In addition to the above, the plant at Dahej has multi wall construction type vessels, a heat treatment
furnace, a grit blasting and painting room, welding positioners for ESSC heads, an automatic tube to
tube sheet welding facility and a Vertical Turret Lathe (VTL) facility.
In H1 FY 2014, the company reported an Operating Income (OI) of Rs. 28.65 crore and net loss of Rs.
19.03 crore, as against OI of Rs. 69.86 crore and profit after tax (PAT) of Rs. 3.32 crore for FY 2013.
March 2014
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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Registered Office
ICRA Limited
1105, Kailash Building, 11th Floor, 26, Kasturba Gandhi Marg, New Delhi 110001
Tel: +91-11-23357940-50, Fax: +91-11-23357014
Corporate Office
Mr. Vivek Mathur
Mobile: 9871221122
Email: [email protected]
Building No. 8, 2nd Floor, Tower A, DLF Cyber City, Phase II, Gurgaon 122002
Ph: +91-124-4545310 (D), 4545300 / 4545800 (B) Fax; +91- 124-4050424
Mumbai
Mr. L. Shivakumar
Mobile: 9821086490
Email: [email protected]
Kolkata
Mr. Jayanta Roy
Mobile: +91 9903394664
Email: [email protected]
1802, 18th Floor, Tower 3,
Indiabulls Finance Centre,
Senapati Bapat Marg,
Elphinstone, Mumbai 400013,
Board : +91-22-61796300; Fax: +91-22-24331390
Chennai
Mr. Jayanta Chatterjee
Mobile: 9845022459
Email: [email protected]
A-10 & 11, 3rd Floor, FMC Fortuna
234/3A, A.J.C. Bose Road
Kolkata—700020
Tel +91-33-22876617/8839 22800008/22831411,
Fax +91-33-22870728
5th Floor, Karumuttu Centre
634 Anna Salai, Nandanam
Chennai—600035
Tel: +91-44-45964300; Fax: +91-44 24343663
Ahmedabad
Mr. L. Shivakumar
Mobile: 989986490
Email: [email protected]
907 & 908 Sakar -II, Ellisbridge,
Ahmedabad- 380006
Tel: +91-79-26585049, 26585494, 26584924; Fax: +9179-25569231
Hyderabad
Mr. Jayanta Chatterjee
Mobile: 9845022459
Email: [email protected]
4th Floor, Shobhan, 6-3-927/A&B. Somajiguda, Raj
Bhavan Road, Hyderabad—500083
Tel:- +91-40-40676500
Bangalore
Bangalore
Mr. Jayanta Chatterjee
Mobile: 9845022459
Email: [email protected]
'The Millenia'
Tower B, Unit No. 1004,10th Floor, Level 2 12-14, 1 & 2,
Murphy Road, Bangalore 560 008
Tel: +91-80-43326400; Fax: +91-80-43326409
Pune
Mr. L. Shivakumar
Mobile: 989986490
Email: [email protected]
5A, 5th Floor, Symphony, S.No. 99, CTS 3909, Range Hills
Road, Shivajinagar,Pune-411 020
Tel: + 91-20-25561194-25560196; Fax: +91-20-25561231