A Infrastructure Ltd

Brickwork Ratings upgrades the ratings for the enhanced Bank Loan Facilities of Rs. 92 Crs. of A Infrastructure Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (31 Aug 2020)	Present
Fund Based	39.30	47.00	Long Term	BWR BBB-/Stable Reaffirmation	BWR BBB /Stable Upgrade
Non Fund Based	40.70	45.00	Short Term	BWR A3 Reaffirmation	BWR A3 + Upgrade
Grand Total	80.00	92.00	(Rupees Ninety Two 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

RATING ACTION / OUTLOOK

The upgrade in the ratings of A Infrastructure Ltd (AIL or the company ) factors in a y-o-y steady growth in revenues, with improved profit and profit margins, coupled with improvement in its overall financial risk profile as indicated by debt protection metrics and overall gearing, besides its adequate liquidity position. Going further, revenues are expected to improve in FY22 supported by higher demand from the rural areas, a key market for AIL, given normal monsoons leading to better crop output and thereby higher disposable rural income. Profitability is also expected to remain healthy for FY22 despite increase in raw material prices. Improvement in overall scale of operations is likely to lead to better fixed cost absorption. AIL's increasing penetration in rural markets and government thrust on rural housing; is likely to further sustain improvement in its business risk profile, and consequently a stronger financial risk profile.

The lockdown and other measures taken by various central and state governments towards containment of COVID-19, did not have any major impact on the AIL's operations as demand was mainly driven by the rural markets. The ratings continue to reflect established market position in the asbestos-cement (AC) sheets industry, wide distributor network and strong financial risk profile.

These strengths are partially offset by its exposure to intense competition from peers and substitute products and exposure to regulatory threats of ban on manufacture or use of asbestos in end-user markets and in key asbestos-producing nations. BWR also notes that there are delays in the commencement of its distillery unit, which was earlier scheduled to commence operations in FY20 and is now extended to Dec 2022.

Rating Outlook: Stable

BWR believes that AIL’s business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case of substantial improvement in operating parameters. BWR may revise its outlook from 'Stable' to 'Negative' in case there is a deterioration in the financial parameters over the medium term.

KEY RATING DRIVERS

Credit Strengths:

Consistent growth in top-line :
The company has witnessed a steady increase in its operating revenues during the last four years and has registered a CAGR of 23.62% over FY18-FY 21. The company’s revenues have been on an increasing trend with a marginal decline of 2.62% in FY20 over FY19, on account of revenue loss due to sudden nationwide lockdown imposed in March 20. AIL has been registering a y-o-y increase by 7.67% backed by double-digit growth in the sale price of AC sheets. The revenue stood at Rs.267.65Crs in FY21, as against Rs.248.58Cr in FY20. The company has registered revenue of Rs.88.29Crs in Q1FY22. BWR is informed that the increased usage of AC pipes in sewerage systems is backed by substantial orders from UP Jal Nigam and others.
The vast experience of the promoters and established track record of operations in the AC building material industry :
While Mr.Sanjay Kumar Kanoria, the promoter has a total experience of around three decades, AIL has a vast operational track record. The company was formed as Shree Pipes in 1980 and was later renamed to AIL in December 1993.
Improved EBITDA and PAT :
Increased EBITDA is driven by increased revenues in FY21. OPM has increased to 7.23% in FY 21 from 6.93% in FY20 on account of increased revenue contribution from AC sheets which is a higher margin product of the company. PAT of Rs.6.21 Crores in FY21 (Rs.3.67 Crores in previous year), was up by 69% despite the Covid lockdown.
Improved Debt protection metrics and overall financial gearing :
ISCR and DSCR of the company has improved driven by increased EBITDA and the same stood at 2.22x and 1.51x in FY21 as against 1.99x and 1.35x respectively in FY20.The overall gearing, TOL/TNW ratio, improved to 2.42x in FY21 from 2.8x in FY20.

Credit Risks:

Delays in commencement of distillery plant :
The company has made investments of Rs.23.55Crs to set up a distillery unit in Kaptanganj, Distt Kushinagar, Uttar Pradesh. AIL had expected to commence the commercial operations of the unit in Mar20; however, due to circumstances beyond its control, AIL was not able to make any progress in the project. However, AIL expects it to commence the operation by Dec 2022.
Volatility in the prices of raw materials & finished goods with a risk of forex fluctuation :

Raw material cost constituted 63% of the total cost of sales in FY21. The company imported 54.14% of total raw material consumed in FY21, in value terms, which exposes the company to forex fluctuation risks. The company is thus exposed to raw material price fluctuation risks.
The vulnerability of margins to volatility in the prices of key raw materials and foreign exchange rate :
The vital raw materials for AIL’s AC products are asbestos fiber, portland cement, flyash, lime and aluminium. While the entire requirement of asbestos fibre is imported, cement is procured from various domestic manufacturers and flyash is obtained from nearby thermal power plants. AIL’s margins remained vulnerable to adverse fluctuations in foreign exchange rates for the unhedged exposure due to unavailability of sufficient natural hedge due to nil export sales. Further, concerns remain on the continued availability of asbestos fiber in requisite quantity to meet its requirement in the light of environmental concerns due to its hazardous nature.

ANALYTICAL APPROACH

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

The ratings of the company are sensitive to improvement in its revenues, gross and net profit margins, working capital cycle besides sanction and disbursement of term loans and working capital debt for the timely implementation of its distillery project.

Positive: The ratings may be upgraded if the company is able to significantly improve its revenues, net worth, debt protection metrics and overall gearing coupled with the improvement in other financial parameters including its working capital cycle and commencement of distillery Unit.

Negative: The ratings may be downgraded if there is any deterioration in the financial risk profile of the company and decline in its revenues and profitability margins and it loans are not sanctioned and disbursed by lenders to ensure timely commencement of operations of its distillery unit.

LIQUIDITY INDICATORS - Adequate

The liquidity of the company is comfortable, as indicated by the current ratio (CR) of 1.28x in FY21, coupled with a moderate working capital cycle to 102 days. Further, the company has been generating an average EBITDA of Rs.17.82Crs for the years FY 19~21 against the interest obligation of Rs.8.72Crs for the same period. The cash accruals of the company were Rs.9.23Crs in FY21 and has projected cash accruals of Rs.9.70Crs in FY22 which are likely to be sufficient for meeting the repayment obligation of Rs.4.47Crs.

ABOUT THE ENTITY

The Company was incorporated as Shree Pipes Limited on 30.08.1980 and installed a plant in 1985 to manufacture Asbestos Cement (AC) Pressure Pipes & Couplings. The company changed its name from Shree Pipes Limited to “A Infrastructure Limited” in Dec 1993. In 2005, the Company diversified its operations to A.C. Roofing Sheets at Ahmedabad.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	267.65	248.58
EBITDA	Rs.Crs.	19.36	17.23
PAT	Rs.Crs.	6.21	3.67
Tangible Net Worth	Rs.Crs.	61.63	55.16
Total Debt/Tangible Net Worth	Times	1.23	1.58
Current Ratio	Times	1.28	1.23

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Nil

ANY OTHER INFORMATION

Nil

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	47.00	BWR BBB/Stable (Upgrade)	31Aug2020	BWR BBB-Stable (Reaffirmation)	22Aug2019	BWR BBB-Stable (Reaffirmation)	19Jul2018	BWR BBB-Stable (Assignment)
Non Fund Based	ST	45.00	BWR A3+ (Upgrade)	31Aug2020	BWR A3 (Reaffirmation)	22Aug2019	BWR A3 (Reaffirmation)	19Jul2018	BWR A3 (Assignment)
Grand Total		92.00	(Rupees Ninety Two Crores Only)

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
Neha Jain Senior Rating Analyst Board : +91 11 2341 2232 neha.j@brickworkratings.com	Ashwini Mital Director - Ratings Board : +91 172 5032 295 / 6 ashwinimital@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

A Infrastructure 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	Bank of Baroda	Cash Credit - Sanctioned	17.60	_	17.60
2	Bank of Baroda	Letter of Credit - Sanctioned	_	16.20	16.20
3	Bank of Baroda	Bank Guarantee - Sanctioned	_	4.50	4.50
4	State Bank Of India (SBI)	Cash Credit - Sanctioned	19.00	_	19.00
5	State Bank Of India (SBI)	Letter of Credit - Sanctioned	_	15.00	15.00
6	State Bank Of India (SBI)	Bank Guarantee - Sanctioned	_	5.00	5.00
7	Un tied portion from consortium of banks	Cash Credit - Sanctioned	10.40	_	10.40
8	Un tied portion from consortium of banks	Letter of Credit - Sanctioned	_	3.30	3.30
9	Un tied portion from consortium of banks	Bank Guarantee - Sanctioned	_	1.00	1.00
Total			47.00	45.00	92.00
TOTAL (Rupees Ninety Two Crores Only)

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