Rationale

 The assigned ratings continue to draw comfort from Action Construction Equipment Ltd.'s (ACE) well-established market position in the construction equipment sector, especially in the crane and forklift segments. The company's strong business profile is supported by a well-diversified portfolio spanning applications in infrastructure, industrial and agriculture sectors. The company's presence in the infrastructure sector is especially strong and it is a market leader in the mobile and fixed tower crane segment. In this segment, it has 60-65% market share, which is supported by the wellestablished ACE brand, wide product offerings, frequent product innovations and cost competitive products. Besides its market leading position in the cranes segment, ACE is the third largest player in the material handling segment. The ratings are also supported by ACE's healthy financial risk profile, characterised by low leveraging, comfortable credit metrics and an adequate liquidity position. The company has comfortable credit indicators with gearing ratio at 0.2 times as on March 31, 2020 (0.1 times as on March 31, 2019) and DSCR at 2.6 times in FY2020 (3.4 times in FY2019). Going forward also, with minimal capex requirements and scheduled repayment of existing term debt, the credit metrics are expected to improve gradually over the medium term. Further, company enjoys a comfortable liquidity profile, supported by surplus cash and liquid investments (Rs. 21.8 crore as on July 31, 2020) and moderate utilisation in the working capital facilities (average buffer of Rs. 62.5 crore in the working capital facilities against the drawing power in the 12-month period ending in July 2020). It also generates comfortable cash flows from operations, and has certain long-term investments in fixed maturity plans (FMPs) and debentures (Rs. 22.8 crore as on July 31, 2020), which lends it financial flexibility. Against these, the company has debt repayments of Rs. 33.7 crore (including buyer's credit) and modest capex requirements in FY2021, which are likely to be serviced comfortably.