Aamor Inox Limited

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 74.88 Crs. of Aamor Inox Limited

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (30 Dec 2020)	Present
Fund Based	77.82	74.88	Long Term	BB+(Issuer Not Cooperating) BB+(ISSUER NOT COOPERATING)	BWR BBB - /Stable Upgrade
Grand Total	77.82	74.88	(Rupees Seventy Four Crores and Eighty Eight lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

BWR has upgraded the long term rating to BWR BBB- (Stable) from BWR BB+ (Issuer Not Cooperating) for the bank loan facilities of Amox Inox Limited (AIL or the company). The upgrade of ratings factors inter alia the extensive experience of promoters of the company and established operational track record of the company, relationship with customers and suppliers. The rating is however constrained by the moderate scale of operations and lower profit margins of the company. The rating outlook is stable due to the continuous YOY growth in scale of operations and order book position of Rs 106 Crs which provides revenue visibility in the near term.

KEY RATING DRIVERS

Credit Strengths:

Experienced promoters and management team: :
AIL is promoted by Mr. Anand Gupta having experience of more than 17 years in the stainless steel industry. Mr. Anand Gupta is a graduate from University of Portsmouth, UK. He brings along an extensive specialty-steelmaking family experience of over 44 years as an ex-promoter of Ambica Steels Limited (ASL), promoted by Late Shri Mahender Pal Gupta (father of Mr. Anand Gupta). The day to day operations of Aamor Inox are managed by an experienced management team.
Product Profile :
Aamor Inox Limited (AIL), formerly known as Ambica Stainless Steel Limited, is India’s leading manufacturer & exporter of ‘specialty stainless steel long-products’ (viz. bright bars, HRAP flats, hexagon bars, square bars, etc. in various grades and sizes) for very high demanding engineering goods sectors such as aerospace, chemical & petrochemical, petroleum & natural gas, aviation, automotive, pharmaceutical, food processing, defence, paper & pulp & marine sectors. The company exports its products worldwide with special focus on Europe and North America.
Reputed client base: :
Having started the exports from scratch (back in the year 2004), Mr. Anand Gupta has developed a strong global market for specialty steel long products, with a reputed and diversified client base ranging from oil & gas, aerospace, petrochemical, pharmaceutical, shipbuilding, power-generation, food & dairy along with many large stockists and traders worldwide. AIL’s major focus markets are Europe (including UK), North America andSouth America.
Comfortable gearing and capital Structure :
The company’s capital structure is comfortable as tangible net worth (analysed) stood at Rs 72.90 Crs as on 31.03.2020 as against Rs 62.1 Crs as on 31.03.2019. Due to this gearing (analysed) is low at 1.12x in FY 20 against 0.91 x in FY 19.
Reasonable scale of operations and average debt protection metrics :
Although Total Operating Income (TOI) of the company has shown degrowth in FY20 due to degrowth in volumes of 12.46% yoy due to disruptions due to Covid-19 pandemic, the scale of operations is reasonable and there has been growth in FY 19 and expected to continue in FY 21. Recovery is estimated from FY 21 onwards with 9MFY21 revenue of Rs 133.05 Crs. Overall debt protection metrics improved in FY 20 (ISCR of 4.04 x in FY 20 against 3.84x in FY 19. DSCR stood at 1.72 x in FY 20.

Credit Risks:

Limited value addition resulting in moderate profitability :
AIL procures stainless steel black bars from various vendors in India and processes these black bars into stainless steel bright bars, resulting in limited value addition in its finished products and hence moderate profitability margins. The company is engaged in the production of a single product i.e. stainless steel bars though of different sizes and grades, which deprives the company from benefits of product diversification, which resulted in low profitability margins over the past few years. Net margins are also low due to high depreciation due to capex incurred in FY 20 for backward integration of rolling mill. Operating profit margin stood at 10.33% in FY 20 compared to 8.89 % in FY 19 and net profit margin stood at 1.83 % in FY 20 against 1.53 % in FY 19 .
Susceptibility to foreign exchange risk :
The company is mainly focused in the export market and its export contribution to total sales stood at ~ 72% for FY20, thus exposing the company to the risk of exchange rate fluctuation. However, this risk is partially offset as the company is availing packing credit in foreign currency.
High level of competition :
There is a high level of competition in the industry with the presence of large and small players, where large integrated players command an advantageous position

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive: BWR may revise the ratings upward if there is a sustained improvement in AIL’s credit profile, with the ability to achieve optimal capacity utilizations and margins over the medium term.

Negative: BWR may revise the ratings downwards if there is a sustained deterioration in the company’s EBITDA, debt protection metrics and/or a stretch in its working capital/liquidity.

LIQUIDITY INDICATORS - Adequate

The current ratio improved from 1.05x in FY19 to 1.13x in FY20, showcasing an improvement in the liquidity position. The working capital utilization at a standalone level for the past six months ending Jan 2021 was 96 %. The company has cash accruals of Rs 13.1 Crs against the minimal repayment of Rs 5.65 Crs in FY 20. The company has cash accruals of Rs 13.03 Crs in FY 21 , against the minimal repayment of Rs 5.35 Crs in FY 21.

ABOUT THE ENTITY

Aamor Inox Limited (AIL), previously known as Ambica Stainless Steel Limited (ASSL) was incorporated on December 15, 2004 and promoted by Mr Anand Gupta. The products manufactured by the company have received various quality and process related certifications by various agencies such as ISO 9001: 2008, AS 9100- C (Quality Management System for the Aerospace Industry, North America), EN 9100-C (Quality Management System for the Aerospace Industry, Europe) and ISO 14001: 2004. The Promoters Mr. Anand Gupta and Ms. Swati Gupta have combined shareholding of ~89 %.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	181.41	201.32
EBITDA	Rs.Crs.	18.74	17.90
PAT	Rs.Crs.	3.33	3.07
Tangible Net Worth	Rs.Crs.	64.22	60.67
Total Debt/Tangible Net Worth	Times	1.41	0.96
Current Ratio	Times	1.13	1.05

KEY COVENANTS OF THE FACILITY RATED

Not applicable

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Care ratings has moved the rating to BB-/A4 INC on 25 Aug 2020

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	74.88	BWR BBB-/Stable	30Dec2020	BB+(Issuer Not Cooperating)	18Dec2019	BBB- (Positive)	27Oct2018	BBB-
Fund Based	ST	NA	NA	NA	NA	18Dec2019	Withdrawal	27Oct2018	A3
Grand Total		74.88	(Rupees Seventy Four Crores and Eighty Eight lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - NA

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Karan Ahluwalia Senior Rating Analyst Board : +91 11 2341 2232 karan.a@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Aamor Inox Limited

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Cash Credit - Sanctioned	55.00	_	55.00
2	Term Loan - Sanctioned	12.55	_	12.55
3	Working Capital Term Loan - Sanctioned	4.98	_	4.98
4	Working Capital Demand Loan - Sanctioned	2.35	_	2.35
Total		74.88	0.00	74.88
TOTAL (Rupees Seventy Four Crores and Eighty Eight lakhs Only)

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