Press Release

MAK Controls & Systems Private Limited

March 25, 2021
Ratings
Amount
Facilities Rating1 Rating Action
(Rs. crore)
38.88 CARE BBB+; Stable
Long Term Bank Facilities Reaffirmed
(Enhanced from 26.12) (Triple B Plus; Outlook: Stable)
CARE BBB+; Stable / CARE A2
Long Term / Short Term 57.29
(Triple B Plus ; Outlook: Stable / A Reaffirmed
Bank Facilities (Enhanced from 35.00)
Two)
96.17
Total Facilities (Rs. Ninety six crore and
seventeen lakh only)
Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers

The ratings assigned to the bank facilities of MAK Controls and Systems Private Limited (MAK) continue to factor in vast
experience of the promoters, MAK’s established and long operational track record of over three decades, its unique product
offering supported by in-house research and development capabilities and MAK being placed among the key vendors for various
defence projects. The ratings also take into account the comfortable capital structure and strategic partnership with leading
engineering groups.
The ratings are, however, constrained by the elongated working capital cycle and small scale of operations for the past few
years.
Rating Sensitivities
Positive Factors
 Consistent improvement in the scale of operations through multiple product segments.
 Reduction in client concentration risk
Negative Factors
 Any major debt-funded capex plan leading to deterioration in gearing above the range of 0.80x to 1.00x.
 Further elongation in collection period leading to continuous deterioration in operating cycle.

Detailed description of the key rating drivers

Key Rating Strengths
Established operational track record and unique product offering
MAK has been in the business of developing and manufacturing engineering equipment for over three decades. Over the years,
MAK has been involved in successfully executing various development projects for the defence segment, which has earned
them the preferred vendor status with most defence laboratories for a range of power supply products. Also, MAK is one of
the very few companies in the world (only company in India) that manufactures Ground Power Units (GPU) and Air Starter Unit
(ASU) for the airline industry.

Reputed clientele in the defense and aviation segment with improved order book position
The company’s clientele includes reputed players in domestic as well export markets and both in the defence and commercial
aviation sector which include Indian Air Force, Indian Navy, Indian Military, Heavy Vehicles Factory, Hindustan Aeronautics
Limited, Bharat Electronics, Bharat Dynamics Ltd etc. The established position of the company in both domestic and
international markets and expertise developed over a period of more than three decades has helped the company in retaining
its clients and ensuring repeat orders from its regular clients in the defense and aviation sectors. The order book position of
the company however stood healthy at Rs.402.02 crore as on January 20, 2021 to be executed over the period of FY21-23.

Comfortable capital structure and stable debt coverage indicators

The company’s main working capital requirement is in the form of bank guarantee limits which are required to be provided
upfront till completion of a particular order. The overall gearing, although moderated to 0.76x as on March 31, 2020, however
continued to be comfortable. The debt coverage indicators stood moderate with Total debt/GCA of 4.89 years as on March 31,
2020 (PY : 3.28 years) and interest coverage ratio of 4.90x in FY20 (PY:4.44x).

1Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications.
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 Press Release

Liquidity: Adequate - Adequate liquidity characterized by sufficient cushion in accruals vis-à-vis repayment obligations of
Rs.1.16 crore for FY21 and moderate cash balance of Rs.3.74 crore as on September 30, 2020. The current ratio of the company
stood at 1.33 times as on March 31, 2020. The average cash credit/ packing credit utilization remained comfortable at 51.09%
for the 12-month period ended January 21. The company has not availed moratorium on interest and installment obligations
extended as part of covid relief measure. However, it has availed the Covid GECL term loan of Rd. 8.50 crore, the repayment
of which is starting in October 2021.

Key Rating Weaknesses

Elongated working capital cycle
The company is engaged in manufacture of capital intensive products which have a relatively longer gestation period to
manufacture, test and deliver. The defense payments are made only after final testing and installation of the products which
takes in total around 8-9 months, whereas the execution and payment cycle of the airline products takes around 3-4 months.
This keeps the company’s receivables level at around 70-140 days on an average. The operating cycle of the company elongated
to 478 days in FY20 against 196 days in FY19. However, the elongation was mainly on account of the receivables booked from
the ELTA project on percentage of completion method which has since been received in March 2021.

Small and stagnant scale of operations, however stable margins

The operating income of the company remained small for the past few years in the range of Rs. 95-105 crore. The orders
undertaken pertain to the airline and defense sectors wherein the period of execution ranges anywhere between 12-14 months
including the testing and implementation period. This keeps the operating income small and stable throughout the tenure of
last five years. The operating margins have remained more or less stable in the past and stood at 15.95% in FY20 (PY: 15.65%).

Analytical approach: Standalone

Applicable Criteria
CARE's Policy on Default Recognition
Financial Ratios – Non financial Sector
Liquidity Analysis of Non-financial sector entities
CARE's Criteria on Rating Outlook and Credit Watch
Criteria For Short Term Instruments
CARE's Methodology For Manufacturing Companies

About the Company

MAK Controls and Systems Private Limited (MAK) is a Coimbatore-based company engaged in manufacturing power supply
systems and other specialized equipment for various defence projects and ground support equipment (GSE) for defence and
commercial aircraft. MAK has a subsidiary in US (Air + Mak Industries, Inc.,) to which MAK supplies fully completed ‘knock-
down units’ of GSEs. The subsidiary in turn re-assembles the same and sells to US airlines (both commercial and defence
segments) after testing.
Brief Financials (Rs. crore) FY19 (A) FY20 (A)
Total operating income 105.66 95.22
PBILDT 16.53 15.19
PAT 6.91 7.03
Overall gearing (times) 0.58 0.76
Interest coverage (times) 3.89 4.90
A – Audited

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating History for last three years: Please refer Annexure-2

Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments/facilities is given in
Annexure-3

Complexity level of various instruments rated for this company: Annexure 4

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Annexure-1: Details of Instruments/Facilities

Size of the Rating assigned
Name of the Date of Coupon Maturity
Issue along with Rating
Instrument Issuance Rate Date
(Rs. crore) Outlook
Fund-based - LT-Cash CARE BBB+; Stable
- - - 30.00
Credit
CARE BBB+; Stable
Non-fund-based - LT/ ST-
- - - 57.29 / CARE A2
BG/LC

Fund-based - LT-Term CARE BBB+; Stable

- - Oct 2024 8.88
Loan

Annexure-2: Rating History of last three years

Current Ratings Rating history
Name of the Type Rating Date(s) & Date(s) & Date(s) & Date(s) &
Sr. Amount
Instrument/Bank Rating(s) Rating(s) Rating(s) Rating(s)
No. Outstanding
Facilities assigned in assigned in assigned in assigned in
(Rs. crore)
2020-2021 2019-2020 2018-2019 2017-2018
1)CARE
1)CARE
CARE 1)CARE BBB+; BBB+;
BBB+;
Fund-based - LT-Cash BBB+; Stable Stable
1. LT 30.00 - Stable
Credit Stable (11-Mar-20) (05-Mar-
(25-Feb-19)
18)

1)CARE A2
1)Withdrawn 1)CARE A2
Fund-based - ST- (05-Mar-
2. ST - - - (11-Mar-20) (25-Feb-19)
EPC/PSC 18)

1)CARE
1)CARE
CARE BBB+;
1)CARE BBB+; BBB+;
BBB+; Stable /
Non-fund-based - LT/ Stable / CARE A2 Stable /
3. LT/ST 57.29 Stable / - CARE A2
ST-BG/LC (11-Mar-20) CARE A2
CARE A2 (05-Mar-
(25-Feb-19)
18)

1)CARE
1)CARE
CARE 1)CARE BBB+; BBB+;
BBB+;
Fund-based - LT-Term BBB+; Stable Stable
4. LT 8.88 - Stable
Loan Stable (11-Mar-20) (05-Mar-
(25-Feb-19)
18)

Annexure-3: Detailed explanation of covenants of the rated instrument / facilities: Not Applicable

Annexure 4: Complexity level of various instruments rated for this company

Sr.
Name of the Instrument Complexity Level
No.
1. Fund-based - LT-Cash Credit Simple
2. Fund-based - LT-Term Loan Simple
3. Non-fund-based - LT/ ST-BG/LC Simple
Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This
classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write
to care@careratings.com for any clarifications.

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 Press Release

Contact us
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Name: Mr Mradul Mishra
Contact no. – +91-22-6837 4424
Email ID – mradul.mishra@careratings.com

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Name - Ms Swathi Subramanian
Contact no.- 94442 34834
Email ID- swathi.subramanian@careratings.com

Relationship Contact
Name: Mr V. Pradeep Kumar
Contact no. : 98407 54521
Email ID : pradeep.kumar@careratings.com

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recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security.
CARE’s ratings do not convey suitability or price for the investor. CARE’s ratings do not constitute an audit on the rated
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