Brickwork Ratings upgrades the rating for the Bank Loan Facilities of Rs. 29.65 Crs. of Andromeda Packaging Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (14 Apr 2021) |
Present | ||
| Fund Based | 18.37 | 29.65 | Long Term |
BWR B+
/Stable; Issuer Not Cooperating Downgraded |
BWR BB
/Stable Upgrade |
| Grand Total | 18.37 | 29.65 | (Rupees Twenty Nine Crores and Sixty Five lakhs Only) | ||
Brickwork Ratings (BWR) has upgraded the long term rating to "BWR BB" with a "Stable" outlook for the bank loan facilities amounting Rs 29.65 Crores of Andromeda Packaging Pvt. Ltd. The rating draws strength from the vast experience of the promoters in the industry, long standing relationship with its customers, average financial risk profile and increase in revenue. However, the rating is constrained by high gearing ratio, stretched liquidity and volatility in the raw material price.
The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR expects that the business risk profile of Andromeda Packaging Pvt. Ltd. will be maintained over the medium term. The rating outlook may be revised to 'Positive' in case the company improves its scale of operations, gearing and liquidity position. The rating outlook may be revised to 'Negative' if there is any deterioration in the financial risk profile of the company.
KEY RATING DRIVERSCredit Strengths:
The promoters have an experience of around 3 decades in the same line of industry which supports the company to maintain a well established customer base thus enabling the company to achieve profitability.
The company's revenue from operations has grown substantially by 39% to Rs 49.00 Crores in FY20 and is expected to increase to Rs 63.54 Crores in FY21 and subsequently to Rs 76.25 Crores in FY22.
DSCR and ISCR of the company stand at 1.17 times and 1.33 times respectively in FY20 indicating company’s adequacy to meet its debt obligations. The FY20 current ratio remains comfortable at 1.85 times. The networth remains moderate at Rs 6.49 Crores and the gearing remains high at 4.07 times in FY21.
The company has been in existence for 27 years and has seen complete business cycles.
Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability.
The firm has a modest scale of operations marked by revenue at Rs 63.54 crores in FY 21. The net profit margin remains low at 0.73% in FY21 and is expected to increase to 0.91% in FY22.
The firm is susceptible to the volatility in the price of Kraft Paper, which is the major raw material used for the production of corrugated boxes which could effect the profitability of the firm.
For arriving at its rating, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Going forward the ability of the company to improve its scale of operation, to increase its revenue and profitability margin, to maintain its financial risk profile and to improve its liquidity position will be the key rating sensitivities.
Positive: The ratings may be upgraded if revenue, profitability and overall credit profile show substantial improvement.
Negative: The rating may be downgraded if there is a significant deterioration in the business and financial risk profile of the company from its current level.
LIQUIDITY INDICATORS - Stretched
Liquidity seems stretched although the current ratio is moderate at 1.85 times in FY20 as against 1.35 times in FY19 and it is expected to reduce marginally to 1.58 times in FY21. Cash and cash equivalents increased slightly to Rs 0.11 Crores as on 31 March 2020 as against Rs 0.04 Crores as on 31 March 2019 and is expected to increase slightly to Rs 0.13 Crores as on 31 March 2021. The Net Cash Accruals/Long Term Debt is low at 0.04 times in FY20 as against 0.06 times in FY19. The Net Cash Accruals/Long Term Debt in FY21 stands at 0.13 times due to decrease in long term borrowings. The net cash accruals are just adequate to cover for the debt repayment obligations. Also, given the proposed loans and increased debt obligations, the company's ability to achieve the estimated net cash accrual remains a rating sensitivity. Working capital utilization of Bank of Maharashtra cash credit limit remains moderate. Days Receivables has reduced marginally to a reasonable 49 days in FY20 from 59 days in FY19 and in FY21, there is further reduction in days receivable to 53 days.
ABOUT THE ENTITYM/s. Andromeda Packaging Private Limited incorporated in 1994 and has been in operation for 27 years with Mr Suresh Kumar Lath and his son Mr Nikhil Lath at the helm of affairs. The unit is into manufacturing of corrugated packaging solution targeted to various industries which include automobile industry, healthcare industry, food industry etc. The main raw material which is used for the manufacture of corrugated boxes is Kraft Paper which is completely environment friendly.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 49.00 | 35.31 |
| EBITDA | Rs.Crs. | 2.42 | 1.31 |
| PAT | Rs.Crs. | 0.36 | 0.29 |
| Tangible Net Worth | Rs.Crs. | 6.49 | 6.13 |
| Total Debt/Tangible Net Worth | Times | 4.07 | 2.79 |
| Current Ratio | Times | 1.85 | 1.35 |
NA
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)| Facilities | Current Rating (2021) | 2021 (History) | 2020 | 2019 | 2018 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 29.65 |
BWR BB/Stable
(Upgrade) |
14Apr2021 |
BWR B+/Stable; Issuer Not Cooperating
(Downgraded) |
NA |
NA
|
19Dec2019 |
BWR BB-/Stable
(Assigned) |
NA |
NA
|
| Grand Total | 29.65 | (Rupees Twenty Nine Crores and Sixty Five lakhs Only) | |||||||||
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 | |
|---|---|
|
Nimmy Anand Ratings Analyst nimmy.a@brickworkratings.com |
Nagaraj K Associate Director - Ratings Board : +91 80 4040 9940 nagaraj.ks@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
|---|---|---|---|---|---|---|
| 1 | Bank of Maharashtra | Cash CreditSanctioned | 11.50 | _ | 11.50 | |
| 2 | Bank of Maharashtra | Cash CreditProposed | 3.50 | _ | 3.50 | |
| 3 | Bank of Maharashtra | Term LoanSanctioned | 2.48 | _ | 2.48 | |
| 4 | Bank of Maharashtra | Term LoanSanctioned | 4.27 | _ | 4.27 | |
| 5 | Bank of Maharashtra | Term LoanSanctioned | 1.00 | _ | 1.00 | |
| 6 | Bank of Maharashtra | GECLSanctioned | 2.90 | _ | 2.90 | |
| 7 | Bank of Maharashtra | Term LoanSanctioned | 3.00 | _ | 3.00 | |
| 8 | Bank of Maharashtra | Term LoanProposed | 1.00 | _ | 1.00 | |
| Total | 29.65 | 0.00 | 29.65 | |||
| TOTAL (Rupees Twenty Nine Crores and Sixty Five lakhs Only) | ||||||
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