Afflatus Trading Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 13.00 Crs. of Afflatus Trading Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (09 Jun 2020)	Present
Non Fund Based	13.00	13.00	Short Term	A2+(CE) Reaffirmation	BWR A2 + (CE) Reaffirmation
Grand Total	13.00	13.00	(Rupees Thirteen Crores 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 Ratings with the symbol CE are based on Credit Enhancement in the form of a Corporate Guarantee by the parent company and the flagship company of the Group which is rated at BWR A-,Stable/A2+. Unsupported rating of Afflatus Trading Pvt Ltd, as assessed by BWR without considering the Credit Enhancement is BWR A4.

RATING ACTION / OUTLOOK

BWR has principally relied upon the audited financial results up to FY21 and projected financials of FY22 & FY23, publicly available information, and information/clarification provided by the Company’s management.

BWR has reaffirmed BWR A2+ (CE) for the short-term bank loan facilities of Rs. 13.00 Crs of the company. Also, in compliance with regulatory guidelines, BWR has reaffirmed unsupported ratings at BWR A4 for the Bank Loan Facilities of Rs. 13.00 Crs availed by ATPL.

The rating continues to derive strength from the Corporate guarantee by its parent company-Assam Roofing Limited (ARL) for the entire bank facility, the strong operational and financial linkages of ATPL with ARL and other Assam Roofing Group companies, and the comfort provided by the ARL in ensuring regular servicing of its financial commitments. ATPL is importing raw materials for captive consumption for the manufacturing of roofing sheets by the Assam Group. However, the rating is constrained by risk arising from the concentrated customer base, and no hedging policies in practice. Going forward, the Company’s ability to manage the raw material price fluctuation risks, regulatory risks, and continuing support from the Group to ensure that there are no defaults in meeting its commitments would be key rating sensitivities.

KEY RATING DRIVERS

Credit Strengths:

Long track record of promoters and the Group Companies :
The promoters have more than four decades of experience in the roofing segment in the NorthEast region. The long track record of the operations in the North eastern region of India by the entire group as a whole, has enabled healthy relationships with the customers and suppliers for all the group companies. However, the customer base for ATPL is only its group companies.
Group Support :
ATPL is engaged in the trading of Asbestos Fibre, Zinc, Cold Rolled Coil, Cement, Paper Pulp etc. and 100 percent of its sales revenue is generated through sales to its group companies, ARL being its major customer. ATPL operates solely as a purchaser for its group companies against confirmed orders from them. ATPL enjoys support from its parent company, ARL which makes advance payments towards all the purchases made by ATPL on behalf of it. ATPL also gets comfort from the Corporate guarantee received from its parent company-Assam Roofing Limited (ARL) for the entire bank facility as it was formed to purchase raw material for ARL which reflects strong operational and financial linkages of ATPL with ARL and other Assam Roofing Group companies. The guarantee provided by the parent company ensures regular servicing of ATPL's financial commitments.
Support of the Parent Company :
ATPL enjoys support from its parent company, ARL which makes advance payments towards all the purchases made by ATPL on behalf of it. ARL has also provided Corporate Guarantee to the bank of ATPL, for the LC limits which have been established.
Increase in Topline in FY21 :
The scale of operations of ATPL improved in FY21. The Company booked total operating income of Rs. 95crs (FY20:Rs.80crs). Revenues increased in FY21 were primarily to rise in realisations per ton on the back of increased steel prices. However, due to its trading nature of business, both operating profit margins and net profit margins have historically remained below 1%.
No Fund Based Borrowings :
The Company has not availed of any fund-based borrowings. The Company does not have any loans except for the non-fund-based Letter of credit availed for the purchase of raw material from domestic as well as international markets.

Credit Risks:

Customer Concentration Risk :
ATPL is dependent on its group companies for its entire revenues. The company purchases only against confirmed orders by them, hence, although the possibility of not being able to sell its purchases does not exist, the risk of not having an alternative client base remains.
No hedging policy :
Since the company does not have a hedging policy, it is exposed to forex fluctuations. However, as per the management, the hedging cost is not commensurate with the gain ATPL would make through obtaining forex cover. In any case, the exchange risk to the company is mitigated as it is in a position to pass on the entire cost difference to its customers (group companies) .
Susceptible to the adverse effect of the changes in Import policy :
Any adverse change in the import policy is likely to impede its operations.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has considered the standalone financials of Afflatus Trading Pvt Ltd. BWR has also assessed the financials of parent company Assam Roofing Ltd. (ARL) for determining the credit enhancement. BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive Triggers
Significant improvement in the performance of the group companies - especially of Assam Roofing Ltd,. leading to an increase in the topline of ATPL, could lead to an upgrade in the unsupported ratings of ATPL also.
Overall improvement in the Operating profit margin on a consistent basis,ISCR greater than 2.5x on a sustained basis and substantial improvement in TNW.

Negative Triggers
A deterioration in the performance of the group companies, especially of Assam Roofing Ltd, or a significant decline in topline of ATPL, which could lead to a downward revision in the unsupported ratings of ATPL also, any change in regulations (including Import policy), which is likely to have adverse impact on the operations of the company.

LIQUIDITY INDICATORS - Adequate

The company’s liquidity position is adequate considering the nature of its operations in which cash deployment is not majorly required, since it obtains payment from its customers (group companies) in advance. Cash accruals of the company stood at Rs. 0.19 crs in FY21. Expected cash accruals of the company are Rs.0.17crs in FY 22, as against negligible repayment obligations. Cash and cash equivalents stood at Rs.1.21crs on 31 March 2021. The Company has not availed the RBI Covid-19 moratorium and has been servicing the obligations regularly. Since the company is operational, the operating expenses along with the repayment obligations would be met through its operating income.

ABOUT THE ENTITY

Incorporated in 2010, Afflatus Trading Pvt Ltd. is one of the five companies belonging to the Assam Roofing Group, with Assam Roofing Ltd. being the flagship company. The other group companies are North East Roofing Pvt. Ltd (NERPL), PDP Steels Limited (PDPSL), Afflatus Trading Pvt. Ltd (ATPL) and Assam Enterprise LLP (which is debt free). ATPL is a 99.90% subsidiary of ARL.

ATPL is engaged in the trading of Asbestos Fibre, Zinc, Cold Rolled Coil, Cement, Paper Pulp etc. and 100 percent of its sales revenue is generated through sales to its group companies, ARL being its major customer. ATPL runs under the directorship of Mr Bhagirath Pasari and Mr R K Laddha.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	95.20	80.07
EBITDA	Rs.Crs.	0.16	0.80
PAT	Rs.Crs.	0.19	0.11
Tangible Net Worth	Rs.Crs.	1.61	1.35
Total Debt/Tangible Net Worth	Times	Not Available	Not Available
Current Ratio	Times	1.11	1.09

KEY FINANCIAL INDICATORS (C.E)-Assam Roofing Ltd.

Key Parameters	Units
Operating Revenue	Rs.Crs.	410.95	355.00
EBITDA	Rs.Crs.	37.43	17.34
PAT	Rs.Crs.	22.01	2.62
Tangible Net Worth	Rs.Crs.	118.57	96.39
Total Debt/Tangible Net Worth	Times	0.10	0.78
Current Ratio	Times	2.15	1.62

KEY COVENANTS OF THE FACILITY RATED

Standard.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

None.

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
Non Fund Based	ST	13.00	BWR A2+(CE) (Reaffirmation)	09Jun2020	A2+(CE) (Reaffirmation)	07Feb2019	A2+ (CE) (Reaffirmation)	26Mar2018	A2+ (CE) (Reaffirmation)
Grand Total		13.00	(Rupees Thirteen Crores Only)

Rating Advisory, as on 10Jun2021
Press Release, as on 10Jun2021
BWR was unable to review ratings due to non-availability of data.

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
Madhu Sonthalia Senior Rating Analyst Board : +91 80 4040 9940 madhusonthalia@brickworkratings.com	Anuradha Gupta Director - Ratings anuradha.g@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Afflatus Trading Pvt. Ltd.

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)	Letter of Credit - Sanctioned	_	13.00	13.00
Total			0.00	13.00	13.00
TOTAL (Rupees Thirteen Crores Only)

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