Rationale

The ratings assigned to NJA Industries Pvt Ltd (NJA) factor in the high client concentration risk for the entity, with its top five customers accounting for more than 90% of revenues in FY2025. Further, the entity operates in the transformer industry, which is highly fragmented and competitive, resulting in pressure on margins and revenues. The ratings are also constrained by the stretched liquidity profile of the company, as reflected by the almost full utilisation of working capital limits. The ratings also take into account the entity’s modest net worth and the exposure of margins to volatility in raw material prices, which has led to fluctuations in profitability in the past as well. While revenue growth is largely dependent on securing tenders, the entity’s ability to maintain service quality and adhere to execution timelines remains crucial. Nonetheless, the ratings derive comfort from the extensive experience of the promoters and the established track record in manufacturing various types of transformers. The rating is also supported by a healthy increase in revenues over the years and a strong outstanding order book. The Stable outlook on the long-term rating reflects ICRA’s opinion that NJA will continue to benefit from its extensive operational track record and established market position