Amba Shakti Ispat Ltd.

Brickwork Ratings Revises the ratings for the Bank Loan Facilities of Rs. 44.10 Crs. of Amba Shakti Ispat Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (27 Oct 2020)	Present
Fund Based	30.00	30.00	Long Term	BWR BB- /(Stable) Downgrade/ISSUER NOT COOPERATING*	BWR BBB - /Stable Upgrade
Non Fund Based	14.10	14.10	Short Term	BWR A4 Downgrade/ISSUER NOT COOPERATING*	BWR A3 Upgrade
Grand Total	44.10	44.10	(Rupees Forty Four Crores and Ten 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

Brickwork Ratings (BWR) has upgraded the long term rating to BWR BBB-(Stable) and short term rating to BWR A3 from BWR BB- (Stable) Issuer Not Cooperating and BWR A4 Issuer Not Cooperating respectively for the bank loan facilities of M/s Amba Shakti Ispat Ltd (ASIL). The rating draws comfort from company's experienced promoters with strong group support (Amba Group), Brand Name (Amba Saria) and network, location of manufacturing facility, moderate financial risk profile and moderate working capital intensity on comfortable operating cycle.

The rating is however constrained by low profitability margins, susceptibility of cyclicality and fluctuations in raw material prices and its presence in a highly fragmented and competitive industry which further puts pressure on profitability.

The 'Stable' outlook indicates a low likelihood of rating change over the medium term as the company is supported by Amba Group.

KEY RATING DRIVERS

Credit Strengths:

Long track record of promoter group in the steel industry :
Amba Shakti Ispat Ltd is part of AMBA group which is promoted by Mr. Surender Kumar Goel. The majorly steel product focused group has vast experience of over four decades with AMBA Shakti Udyog limited as the flagship. Being a part of an established group also provides the adequate financial flexibility required in the scale up and subsequent stabilization. The rating also draws comfort that the promoters own other company also, namely, Amba Shakti Industries Ltd which operate in the same line of activity. Since the management and shareholding is common, the company can seek backing or support from the group entity when facing financial distress in future.
Brand name and network :
The company has a well established brand value with the name “Amba Saria” and a long standing relationship with a diversified base of around 450 dealers and 50 distributors, with most of them based out of Madhya Pradesh, Uttar Pradesh , Delhi , Haryana and Rajasthan. Amba Group has a presence in 11 states with their well-known brands - AMBASHAKTI 500 SD/ AMBA SARIA. The Group has strategically established plants at various location across the country to maximise its presence.
Location of manufacturing facility :
The plant site at Kala Amb, Himachal Pradesh has a location advantage of being strategically located with favourable government policies and ease of access of raw material with conveniently connected by road to all major cities and towns of their target areas in Haryana, Punjab, Chandigarh, J&K, Himachal Pradesh & Uttaranchal
Moderate financial risk profile :
The financial risk profile of the company is moderate with tangible net worth of Rs. 34.93 Cr and gearing at 1.44 times as per Provisional FY 21. The debt protection metrics were moderate, as reflected in ISCR (interest service coverage ratio) of 1.38 times and DSCR (debt service covering ratio) of 1.44 times as per Provisional FY 21 and net cash accruals to total debt of 6% as per Provisional FY 21. The financial risk profile is expected to improve steadily over the medium term with reduction in debt and increasing net worth.
Moderate working capital intensity on comfortable operating cycle :
The company as on March 31,2021 has demonstrated a low working capital intensity mainly on efficient operating cycle management. The operating cycle has remained at 50 days in FY2021.While the inventory days as on March 31,2021 remained at 46 days, the debtor days remained at 32 days, the creditor days however remained at 27 days as on March 31,2021.

Credit Risks:

Intense competition in the industry :
The steel industry is highly fragmented with the presence of both organized and unorganized players in the downstream segment providing similar products/services. Hence, the company faces competition from regional players leading to intense competition and pricing pressures, which in turn affect the profitability margins of the company
Susceptibility to cyclicality and fluctuation in raw material prices :
The performance of the company is linked to the steel industry, with cyclical changes in demand and price volatility. The demand for steel products depends on the growth of primary end user segments such as infrastructure and real estate. Any slowdown may in turn adversely affect the demand for steel products over the medium term. However in order to mitigate the risk of raw material prices volatility it buys raw materials in bulk when prices are low.
Low Profitability Margin :
The company has thin profitability margins owing to volatility in the input prices. The company has reported the operating profit margin was 3.06% with net profit margin at 0.04% in FY20 as compared to 2.73% and 0.13% respectively in FY 19, while in FY21 (Provisional) the operating profit margin stood at 2.21% with net profit margin 0.23%.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, 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, improvement in revenues, and profitability margins will be the key rating sensitivities.

Positive : The rating will be upgraded if the company is able to make significant and sustained improvement in their revenues, and profitability margins.

Negative : The rating will be downgraded if there is any deterioration in the financial risk profile and liquidity of the company.

LIQUIDITY INDICATORS - Adequate

Cash and cash equivalents is Rs. 1.23 Cr as on end FY 21. The gearing ratio of the company is also moderate at 1.44 times for FY 21.The company generated an internal cash accrual of Rs.2.97 Crs in FY20 against a CPLTD (current portion of long term debt) of Rs. 0.56 Crs in FY20, while in FY20 the company has generated an internal cash accrual of Rs. 2.64 Crs against CPLTD of Rs. 0.51 Crs for FY19 , which has been successfully paid off. The company’s average working capital utilization stood at 90% for the past one year. Further, as on 31.03.2021 current ratio stood at 1.31x. The debt protection of the metrics of the company are moderate with an ISCR at 1.38 times and DSCR at 1.44 times for FY 21. Furthermore, the company has got sanction of additional GECL (Guaranteed emergency credit line) loan of Rs. 5.99 crore under schemes of RBI to support Micro, small and medium enterprise (MSME) sector during the covid-19 pandemic. With these additional working capital facilities and adequate expected cash accruals against repayments, the liquidity position will remain "adequate".

ABOUT THE ENTITY

Amba Shakti Ispat Limited is a Limited Company established at 6-Kala Amb, Industrial Area, Kala Amb (Himachal Pradesh). The company is promoted by Mr. Sanjeev Goel, Mr. Pankaj Khetan and Mr. Gravit Goel. The Company is engaged in the manufacturing of M.S./T.M.T. Bar & MS Ingots. The unit has started its Commercial Production on 22.07.2004. The Installed Capacity of the unit is 96000 M.T.P.A. for the manufacturing of MS/TMT Bars

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	254.64	263.93
EBITDA	Rs.Crs.	7.79	7.20
PAT	Rs.Crs.	0.09	0.34
Tangible Net Worth	Rs.Crs.	34.21	34.12
Total Debt/Tangible Net Worth	Times	0.96	0.99
Current Ratio	Times	1.29	1.27

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	30.00	BWR BBB-/Stable (Upgrade)	27Oct2020	BWR BB- (Stable) (Downgrade/ISSUER NOT COOPERATING*)	30Sep2019	BWR BB+(Stable) (Upgrade)	NA	NA
Non Fund Based	ST	14.10	BWR A3 (Upgrade)	27Oct2020	BWR A4 (Downgrade/ISSUER NOT COOPERATING*)	30Sep2019	BWR A4+ (Upgrade)	NA	NA
Grand Total		44.10	(Rupees Forty Four Crores and Ten lakhs 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
Sanskriti Jain Rating Analyst sanskriti.j@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Amba Shakti Ispat 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	Punjab National Bank	Cash Credit - Sanctioned	_	_	0.00
2	Punjab National Bank	Letter of Credit - Sanctioned	_	_	0.00
3	Punjab National Bank	Bank Guarantee - Sanctioned	_	_	0.00
4	Punjab National Bank	Cash Credit - Sanctioned	30.00	_	30.00
5	Punjab National Bank	Letter of Credit - Sanctioned	_	12.00	12.00
6	Punjab National Bank	Bank Guarantee - Sanctioned	_	2.10	2.10
Total			30.00	14.10	44.10
TOTAL (Rupees Forty Four Crores and Ten lakhs Only)

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