Ashiana Ispat Limited

Brickwork Ratings reaffirms the ratings with a change in outlook to Negative for the Bank Loan Facilities of Rs. 68.84 Crs. of Ashiana Ispat Limited.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (07 Feb 2024)	Present
Fund Based	63.84	63.84	Long Term	BWR BBB-/Stable Reaffirmation	BWR BBB - /Negative Reaffirmation and change in Outlook
Non Fund Based	5.00	5.00	Short Term	BWR A3 Reaffirmation	BWR A3 Reaffirmation
Grand Total	68.84	68.84	(Rupees Sixty Eight Crores and Eighty Four 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
*** The Outstanding has been taken as on 30 September 2023, based on the statement of accounts received from the banks.

RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) has reaffirmed the long-term and short-term ratings of Ashiana Ispat Ltd. ( 'AIL' or 'the company') with a change in the outlook to Negative.

The reaffirmation in the ratings for the bank loan facilities of Ashiana Ispat Ltd. ( 'AIL' or 'the company') factors in its experienced promoters with an established track record of business operations, well-equipped manufacturing facility coupled with a diversified customer base with longstanding relationships, comfortable operating cycle. The ratings also derive comfort from the positive demand and positive outlook for the steel industry backed by the National Steel Policy.

The rating, however, remains constrained by thin profitability, and the stretched liquidity position which in the past has been mitigated by way of bringing in additional liquidity by the promoters. Further, the company continues to remain exposed to fluctuating profitability margins and susceptible to volatility in raw material prices and product concentration risk, sector cyclicality, regulatory risk in the National Capital Region, and intense competition in the steel industry.

Rating Outlook: Negative

The outlook has been revised to ‘Negative’ owing to moderation in the performance of the company leading to a decline in operating income, profitability margins, and the continued stretched liquidity. The change of outlook also considers the material event that the statutory auditor has resigned just before the signing of the quarterly results and the company has appointed new auditors to fill the vacancy.

KEY RATING DRIVERS

Credit Strengths:

Locational Advantage :
The company is located in the Bhiwadi cluster and thus has a competitive advantage in terms of skilled labor, logistics, production knowledge, and vendors making the company more efficient and cost-effective.
Networth :
Net worth of the company is increasing Y-O-Y due to retention of profits
Debt Protection Metrics :
The ISCR and DSCR of the company have improved and remained moderate as per industry standards for FY23 as it was estimated at 1.66 times (ISCR) and 0.92 times (DSCR), as compared to ISCR of 1.46x and DSCR of 0.87x in FY22. The improvement is a result of improved EBITDA and PAT for the Financial Year 23. Overall gearing of the company as indicated by TD/TNW has improved to 2.46x in FY23 from 2.49x in FY22 owing to a consistent increase in the TNW of the company in FY23.
Comfortable Cash Conversion Cycle :
The Gross current assets days of the company have improved to 58 days in FY23 from 63 days in FY22 on account of lower inventory and receivable days in FY23. The trade receivables of less than six months are under running account.

Credit Risks:

Regulatory Risk :
The new set of restrictions imposed in Delhi under the Graded Response Action Plan (GRAP) stage III, came into enforcement on 01 October 2023. The ban on construction and demolition activities covers earthwork for excavation, boring, and drilling; fabrication and welding operations; loading and unloading of construction material; transfer of raw material, including fly ash, either manually or through conveyor belts and vehicular movement on unpaved roads. This has resulted in operational restrictions on the company during that tenure for the National Capital Region.
Competition in the Industry :
Entry barriers in the industry are low on account of limited capital and technology requirements and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability.

ANALYTICAL APPROACH - Standalone

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

RATING SENSITIVITIES

Upward: BWR may revise the ratings upward in the case of a substantial improvement in the scale of operations, EBIDTA margins, and debt protection metrics.

Downward: BWR may revise the rating downward in the case of a reduction in the EBITDA margins, deterioration in debt protection metrics and scale of operations.

LIQUIDITY INDICATORS - Stretched

The EBITDA of 9MFY24 stood at Rs 8.60 crs against the interest obligation of Rs 6.36 Crs for the same period which is comparatively similar to the EBITDA of 9MFY23 at Rs. 10.42 crores against interest obligations of Rs. 5.45 crores. Given this analysis for the said period, the liquidity of the AIL is expected to remain at "stretched" levels as per the latest unaudited financial results of Q3FY24 and 9MFY24. Further, in the half-yearly performance, the Net Cash Accruals for H1FY24 stood at Rs. 1.61 Crs. The current ratio of AIL for H1FY24 stood at 1.35 times. The ISCR stood at 1.39x in H1FY24. The DSCR of the company stood at 0.54 times in H1FY24.
The current ratio of Ashiana Ispat Limited improved in FY23 vis-a-vis FY22, as for FY 22-23, it stood at 1.40 times as against FY 21-22 stood at 1.34 times. The Net cash accruals stood at Rs 5.66 crore for FY23 as against Rs. 3.55 crore in FY22. The CPLTD of the company stood at Rs. 6.19 crores in FY23 and at Rs. 6.30 crores in FY22. This is due to the capital-intensive as well as labor-intensive nature of the business. However, despite all the improvements the company recorded low free cash and bank balance of Rs. 0.17 crore as on 31 March 2023. The DSCR of the company stood at 0.92 times in FY23. Additionally, AIL's cash conversion cycle remained moderate and has improved to 57 days in FY23 from 64 days in FY22 on account of improvement in inventory and receivable days that is 26 days and 60 days respectively in FY23.

ABOUT THE ENTITY

Macro Economic Indicator	Sector	Industry	Basic Industry
Industrials	Capital Goods	Industrial Products	Iron & Steel Products

AIL was incorporated in 1992 and was promoted by Mr. Naresh Chand and Mr. Puneet Jain. The company is listed on the Bombay Stock Exchange (BSE). AIL manufactures Thermo Mechanically Treated (TMT) bars for domestic construction, engineering, automotive & infrastructure sectors under the brand name ‘KAMDHENU SARIA’. It has an installed capacity to manufacture 240,000 tonnes per annum (TPA) of TMT bars. Its manufacturing unit is located in Bhiwadi (Rajasthan). The company has a very well-established brand name and brand image.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21 - 22 (Audited)	FY 22 - 23 (Audited)	FY 23 - 24 (Unaudited - Others(9M))
Operating Revenue	Rs.Crs.	438.67	464.57	231.84
EBITDA	Rs.Crs.	10.18	11.84	8.60
PAT	Rs.Crs.	1.01	3.00	1.08
Tangible Net Worth	Rs.Crs.	34.14	37.14	Not Available
Total Debt / Tangible Net Worth	Times	2.49	2.46	Not Available
Current Ratio	Times	1.34	1.40	Not Available

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

None, No outstanding rating with any other CRA.

ANY OTHER INFORMATION

None.

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

Facilities	Current Rating (2024)			2024 (History)		2023		2022		2021
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	63.84	BWR BBB-/Negative (Reaffirmation and change in Outlook)	07Feb2024	BWR BBB-Stable (Reaffirmation)	NA	NA	07Nov2022	BWR BBB- Stable (Reaffirmation)	24Aug2021	BWR BBB-Stable (Upgrade)
		0.00	NA	NA	NA	NA	NA	NA	NA	27Sep2021	BWR BBB- Stable (Reaffirmation)
Non Fund Based	ST	5.00	BWR A3 (Reaffirmation)	07Feb2024	BWR A3 (Reaffirmation)	NA	NA	07Nov2022	BWR A3 (Reaffirmation)	24Aug2021	BWR A3 (Upgrade)
		0.00	NA	NA	NA	NA	NA	NA	NA	27Sep2021	BWR A3 (Reaffirmation)
Grand Total		68.84	(Rupees Sixty Eight Crores and Eighty Four lakhs Only)

*** The Outstanding has been taken as on 30 September 2023, based on the statement of accounts received from the banks. COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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
Diksha Jain Rating Analyst diksha.j@brickworkratings.com	Ravi Rashmi Dhar Associate Director - Ratings ravi.d@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Ashiana Ispat Limited

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	State Bank Of India (SBI)	Term Loan - Out-standing	2.37	_	2.37
2	State Bank Of India (SBI)	Cash Credit - Sanctioned	29.00	_	29.00
3	State Bank Of India (SBI)	GECL - Out-standing	5.07	_	5.07
4	State Bank Of India (SBI)	BG/LC/ILC - Sanctioned	_	5.00	5.00
5	State Bank Of India (SBI)	GECL 2.0 - Out-standing	3.35	_	3.35
6	Yes Bank	GECL - Out-standing	2.55	_	2.55
7	Yes Bank	Cash Credit - Sanctioned	21.50	_	21.50
Total			63.84	5.00	68.84
TOTAL (Rupees Sixty Eight Crores and Eighty Four lakhs Only)

* The Outstanding has been taken as on 30 September 2023, based on the statement of accounts received from the banks.

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