Rationale

 The rating reaffirmation factors in the established market position of CTR Manufacturing Industries Private Limited (CTR) in tap changers and fire protection systems for transformers in the country, a healthy financial risk profile, its strong liquidity position and moderate debt levels. The ratings also factor in the technological tie-ups with various multinational companies, which enable the company to maintain its market leadership in the tap changer and fire protection market for transformers. CTR reported a healthy revenue growth of 9.4% at Rs. 483.9 crore in FY2024 with an operating profit margin (OPM) of ~16.3%, aided by stable demand for its products. ICRA expects CTR’s transformer segment to benefit from the growth in the power sector amid the various reforms being undertaken. The ratings, however, continue to be constrained by the company’s moderate scale of operations coupled with moderately high working capital intensity of operations. The working capital intensity has remained moderately high driven by the long receivable cycle of around 135 days on a consolidated basis. ICRA, however, notes that the company has been making constant efforts to streamline its debtor position through favourable arbitration directives and recovery measures, which has lowered the debtor days to 123 days in FY2024 from 162 days in FY2022. Although the company’s receivable position has improved, it continues to face moderately high working capital intensity. The ratings also take into consideration the susceptibility of demand for transformers and its ancillaries to Government policies along with the increasing competition from existing domestic players and the potential entry of international players. The Stable outlook on the long-term rating reflects ICRA’s opinion that CTR will continue to benefit from the extensive experience of its promoters, its strong net worth and a healthy liquidity position. Further, the company’s operations shall remain supported by the Government’s continuing thrust on infrastructure to support growth.