Anadrone Systems Private Limited
February 15, 2024
Rating
Facility Amount Rating Rating Action Complexity
(Rs. Crore) Indicator
IVR BBB-; Stable Reaffirmed Simple
Long Term Bank Facilities
11.50 (IVR Triple B Minus
– Cash Credit
with Stable outlook)
IVR BBB-; Stable Assigned Simple
Long Term Bank Facilities
23.00 * (IVR Triple B Minus
– Cash Credit
with Stable outlook)
IVR BBB-; Stable Reaffirmed Simple
Long Term Bank Facilities
30.00 (IVR Triple B Minus
– Bank Guarantee
with Stable outlook)
IVR BBB-; Stable Assigned Simple
Long Term Bank Facilities
10.00 * (IVR Triple B Minus
– Bank Guarantee
with Stable outlook)
55.50 Reaffirmed Simple
(reduced from
Short Term Bank Facilities Rs.66.50 crore and IVR A3
– Bank Guarantee including proposed (IVR A Three)
limit of Rs.10.50
crore)
Total 130.00
(Rupees One
hundred and thirty
crore only)
Details of Facilities are in Annexure 1
Detailed Rationale
The assignment/reaffirmation of rating assigned to the bank facilities of Anadrone Systems
Private Limited (ASPL) derive strength from its experienced promoter and qualified
management team, reputed clientele coupled with healthy order book position providing short
term revenue visibility. Also, the ratings positively note the healthy capital structure and sound
debt protection metrics of the company in FY2023. However, these rating strengths remain
constrained by moderation in financial performance in FY2023; albeit significant improvement
witnessed during 9MFY2024, exposure to customer concentration and the need for constant
upgradation of technology, tender driven nature of its business with intense competition and
exposure to foreign currency fluctuation risk.
Key Rating Sensitivities:
1
Upward factors
• Significant growth in the scale of business with improvement in profitability metrics
thereby leading to improvement in cash accruals and debt protection metrics on a
sustained basis
• Sustenance of the capital structure
Downward Factors
• Dip in operating income and/or profitability impacting the debt coverage indicators on
a sustained basis.
• Moderation in the capital structure with overall gearing deteriorated over 1x
• Stretch in average receivables leading to weakening of liquidity
List of Key Rating Drivers with Detailed Description
Key Rating Strengths
Experienced and qualified promoters and management team
The founder promoter of the company, Mr. Anant Arun Bhalotia is an MBA by qualification and
has an experience of over a decade in the manufacturing of arial target drones for the defence
sector. He is also the Managing Director of the company and is actively involved in managing
the day-to-day operations of the company along with the support of other Directors – Mrs.
Sunita Bhalotia (mother of Ms. Anant Bhalotia) and Mrs. Shriya Bhalotia (wife of Mr. Anant
Bhalotia). ASPL’s long presence in the defence sector has enabled it to build strong
relationships with its customers and suppliers. The directors are supported by a team of
experienced and qualified professionals.
Reputed clientele, albeit customer concentration
The Ministry of Defence is ASPL’s sole customer. The company bids for defence projects
floated by the ministry on a fixed-contract basis. Though the company is exposed to client
concentration risk, yet association with government department reduces counter party credit
risk and ensures regular inflow of orders. However, any changes in the procurement policy of
the defence forces or a significant cutback in defence spending may adversely impact the
company's revenue and order book position.
Strong financial risk profile marked by healthy capital structure and sound debt
protection metrics
The capital structure of the company remained conservative over the past three fiscals with
low reliance on external debts. The overall gearing improved and remained comfortable at
2
0.09x as on March 31, 2023, as against 0.24x as on March 31, 2022. Further with reduction
in overall debt levels and consequent reduction in interest cost in FY2023, debt coverage
indicators also improved with ICR of 14.81x (6.01x in FY2022) in FY23, total debt to GCA of
0.39x (0.56x in as on March 31,2022) and total debt to EBITDA of 0.29x (0.39x March 31,2022)
as on March 31,2023. Total indebtedness of the company as reflected by TOL/TNW stood
comfortable at 0.87x as on March 31, 2023 (1.06x as on March 31, 2022).
Healthy order book position providing short term revenue visibility
ASPL’s order book position as of December 01, 2023, stood at Rs.392.68 crore which provides
revenue visibility of 5.32x of operating revenue of FY2023. The orders are expected to be
completed within next 12-24 months. ASPL bagging the orders wherein it is technically
qualified shall be a key rating monitorable as it drives the revenue towards projected levels.
Favourable industry outlook
The Indian drone industry has been flying high and is expected to move even further in the
coming years. The Indian government has set a target of achieving a $1 billion drone industry
by 2025 and has taken various measures to support the industry. Some of them include
creating a drone task force and launching a dedicated portal for drone operations. Drones are
being increasingly adopted in sectors such as agriculture, defence, and
logistics. The defence and security sectors are significant adopters of drone technology for
surveillance, reconnaissance, and target acquisition. Government has allocated Rs.120 crores
for a PLI scheme to incentivize drone manufacturing in India. Under the PLI scheme for the
drone industry, the government will provide incentives to manufacturers based on a fixed
percentage of the value addition they make.
Key Rating Weaknesses:
Moderation in financial performance in FY2023; albeit significant improvement
during 9MFY2024
Total operating income (TOI) witnessed a moderation from Rs.209.83 crore in FY2022 to
Rs.73.82 crore in FY2023 due to slowdown in demand and lower execution of orders by the
company. Despite the decrease in top line, EBITDA margin improved significantly from
12.90% in FY2022 to 22.47% in FY2023 on account of decrease in raw material cost and other
operational overheads. Also, the amount of closing inventory increased substantially from
Rs.6.72 crore as on March 31, 2022, to Rs.24.92 crore as on March 31, 2023, which added to
the increase in operating margin in FY2023. The increase in closing inventory as on March
3
31, 2023, is due to stocking of raw materials by the company in view of crystallisation of its
upcoming orders and delays in dispatch of finished goods. Also, the delivery of products by
the company depends on the milestone dates set by the Ministry of Defence. Since the
milestone dates were not due by March 31, 2023, it resulted in increase in inventory levels as
on the account closing date. With increase in operating margin, PAT margin also increased
significantly from 8.59% in FY2022 to 13.77% in FY2023. However, due to decrease in
absolute profits, GCA moderated from Rs.19.11 crore in FY2022 to Rs.12.49 crore in FY2023.
TOI witnessed a significant increase during 9MFY2024 to Rs.201.15 crore as against Rs.31.43
crore during 9MFY2023 driven by higher execution of orders. Consequently, ASPL achieved
a PBT of Rs.35.33 crore during 9MFY2024 as against a PBT of Rs.4.61 crore during
9MFY2023. Given the current scale of operations and unexecuted order book of Rs.392.68
crore as on December 01, 2023, the operating income and overall profitability is likely to
improve going forward. However, the achievability of the same remains critical from rating
perspective.
Need for constant upgradation of technology
ASPL need to upgrade/modify its products continuously as per changing customer needs
which requires continuous spending on research and development.
Tender driven nature of business coupled with intense competition
ASPL operates in a highly regulated industry with MOD being its only client. Furthermore, the
orders are tender-based, and the revenue of the company is dependent on its ability to bid
successfully for these tenders. Thus, there is tendency of revenue profile to remain fluctuating
depending upon the orders bagged. Nevertheless, with promoters’ long standing experience
and moderate orderbook in hand the company’s financial profile in near to medium term is
likely to remain buoyant. However, the defence sector is intensely competitive, characterised
by the presence of large players. Besides, a tender-based contract awarding system tends to
keep the operating margins under check.
Exposure to foreign exchange fluctuation risk
ASPL is heavily dependent on imports for a major portion of its raw material requirements.
Further, the company also imports various services to meet the specific requirements of its
customer. Hence, the profitability of the company remains exposed to risk arising out of
movements in foreign currencies. Nevertheless, ASPL has earned a forex gain of Rs.2.68
crore in FY23 (Rs.1.29 crore in FY2022). ASPL does not implement any prudent hedging
4
policy. The unhedged foreign currency exposure stood at Rs.52.34 crore as on December 31,
2023.
Analytical Approach: Standalone
Applicable Criteria:
Rating Methodology for Manufacturing Companies
Financial Ratios & Interpretation (Non-Financial Sector)
Criteria of assigning rating outlook
Policy of default recognition
Criteria – Complexity Level of Rated Instruments/Facilities
Liquidity: Strong
The liquidity profile of the company is expected to remain strong in the near to medium term
on the back of its expected sufficient cash accruals vis-à-vis its nil long-term debt repayment
obligations and healthy gearing headroom underpinned by its comfortable leverage ratios.
ASPL earned healthy gross cash accruals of Rs.12.49 crore in FY2023. The overall gearing
remained comfortable at 0.09x as on March 31, 2023. The current ratio stood comfortable at
1.32x as on March 31, 2023. Moreover, the average working capital utilisation remained low
during the last twelve months ended September 30, 2023, indicating a comfortable liquidity
position of the company.
About the Company
Anadrone Systems Private Limited (ASPL) was incorporated in June 2004 as Sure Safety
Solutions Pvt. Ltd in Mumbai, Maharashtra. Later rechristened as ASPL during January 2019.
The company is engaged in manufacturing and servicing of arial target drones for the defence
industry. ASPL has been in technical collaboration with UK based defence specialist QinetiQ
Target Systems Ltd from the year 2008 and had become a trusted supplier of modernized,
supersonic defence system equipment. ASPL runs its business on an order-based model.
Financials (Standalone):
(Rs. crore)
For the year ended* / As On 31-03-2022 31-03-2023
Audited Audited
Total Operating Income 209.83 73.82
Total Income 212.41 74.35
EBITDA 27.07 16.59
PAT 18.25 10.24
Total Debt 10.61 4.87
5
Tangible Net worth 44.39 54.74
EBITDA Margin (%) 12.90 22.47
PAT Margin (%) 8.59 13.77
Overall Gearing Ratio (x) 0.24 0.09
*Classification as per Infomerics’ standards.
Status of non-cooperation with previous CRA:
CRISIL has continued to classify the rating of ASPL under “ISSUER NOT COOPERATING”
vide its Press Release dated May 13, 2022 due to non-availability of requisite information to
carry out a review.
India Ratings has continued to classify the rating of ASPL under “ISSUER NOT
COOPERATING” vide its Press Release dated October 26, 2023 due to non-availability of
requisite information to carry out a review.
Any other information: Nil
Rating History for last three years:
Sr. Name of Current Rating (Year 2023-24) Rating History for the past 3 years
No Instrument/ Type Amount Rating Date(s) & Date(s) & Date(s) &
. Facilities outstanding Rating(s) Rating(s) Rating(s)
(Rs. Crore) assigned in assigned in assigned in
2022-23 2021-22 2020-21
1 Long IVR BBB- IVR BBB- - -
Term /Stable /Stable
Cash Credit 11.50
(December
20, 2022)
2 Long IVR BBB- - - -
Cash Credit 23.00
Term /Stable
3 Long IVR BBB- IVR BBB- - -
Bank Term /Stable /Stable
30.00
Guarantee (December
20, 2022)
4 Bank Long IVR BBB- - - -
10.00
Guarantee Term /Stable
5 Short 55.50 IVR A3 IVR A3 - -
Term (reduced from (December
Rs.66.50 crore 20, 2022)
Bank
and including
Guarantee
proposed limit
of Rs.10.50
crore)
Name and Contact Details of the Rating Analyst:
Name: Ms. Harshita Gupta Name: Mr. Avik Podder
Tel: (033) 46022266 Tel: (033) 46022266
6
Email: [email protected] Email: [email protected]
About Infomerics Ratings:
Infomerics was founded in the year 1986 by a team of highly experienced and knowledgeable
finance professionals. Subsequently, after obtaining Securities Exchange Board of India
registration and RBI accreditation and the activities of the company are extended to External
Credit Assessment Institution (ECAI).
Adhering to best International Practices and maintaining high degree of ethics, the team of
knowledgeable analytical professionals deliver credible evaluation of rating.
Infomerics evaluates wide range of debt instruments which helps corporates open horizons to
raise capital and provides investors enlightened investment opportunities. The transparent,
robust and credible rating has gained the confidence of Investors and Banks.
Infomerics has a pan India presence with Head Office in Delhi, branches in major cities and
representatives in several locations.
For more information visit www.infomerics.com
Disclaimer: Infomerics ratings are based on information provided by the issuer on an ‘as is where is’ basis.
Infomerics credit ratings are an opinion on the credit risk of the issue / issuer and not a recommendation to buy,
hold or sell securities. Infomerics reserves the right to change or withdraw the credit ratings at any point in time.
Infomerics ratings are opinions on financial statements based on information provided by the management and
information obtained from sources believed by it to be accurate and reliable. The credit quality ratings are not
recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any
security. We, however, do not guarantee the accuracy, adequacy or completeness of any information, which we
accepted and presumed to be free from misstatement, whether due to error or fraud. We are not responsible for
any errors or omissions or for the results obtained from the use of such information. Most entities whose bank
facilities/instruments are rated by us have paid a credit rating fee, based on the amount and type of bank
facilities/instruments. In case of partnership/proprietary concerns/Association of Persons (AOPs), the rating
assigned by Infomerics is based on the capital deployed by the partners/proprietor/ AOPs and the financial strength
of the firm at present. The rating may undergo change in case of withdrawal of capital or the unsecured loans
brought in by the partners/proprietor/ AOPs in addition to the financial performance and other relevant factors.
Annexure 1: Details of Facilities
Name of Facility Date of Coupon Maturity Size of Facility Rating
Issuance Rate/ IRR Date (Rs. Crore) Assigned/
Outlook
- 34.50 IVR BBB-/
Cash Credit - - (enhanced from Stable
Rs.11.50 crore)
- 40.00 IVR BBB-/
Bank Guarantee - - (enhanced from Stable
Rs.30.00 crore)
7
- 55.50 IVR A3
(reduced from
Rs.66.50 crore
Bank Guarantee - -
and including
proposed limit of
Rs.10.50 crore)
Annexure 2: Facility wise lender details:
https://www.infomerics.com/admin/prfiles/len-anadrone-feb24.pdf
Annexure 3: List of companies/Entities considered for consolidated analysis: Not
Applicable
Annexure 4: Detailed explanation of covenants of the rated instrument/facilities: Not
Applicable
Note on complexity levels of the rated instrument: Infomerics has classified instruments
rated by it on the basis of complexity and a note thereon is available at www.infomerics.com.
