AR Ispat

Brickwork Ratings upgrades the long term ratings for the Bank Loan Facilities of Rs. 32.01 Crs. of AR Ispat

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (19 May 2020)	Present
Fund Based	14.33	32.01	Long Term	BWR BB (Stable) Upgradation	BWR BB + /Stable Upgrade
Grand Total	14.33	32.01	(Rupees Thirty Two Crores and One 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

BWR has upgraded the long term rating of the bank facilities amounting to Rs. 32.01 Cr to AR Ispat to BWR BB+(Stable) Upgrade. The rating upgradation, inter-alia, factors like experienced management, scale of operation, moderate net worth, debt protection metrics, net profit margin and current ratio. However, the rating is constrained by the risk of operating profit margins, track Record and cyclical nature of industry, high gearing ratios and the impact of the COVID 19 pandemic on the industry.

BWR has essentially relied upon the audited financial statements of AR Ispat up to FY20, FY21, and projected financial statements of FY22, publicly available information and information/clarifications provided by the entity’s management.

BWR believes that the AR Ispat 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 the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures

Going forward the ability of the company to improve its operating profit margins, track Record and cyclical nature of industry, and high gearing ratios would be its key rating sensitivity.

KEY RATING DRIVERS

Credit Strengths:

Management Experience :
The Company was incorporated in 2018. It is currently managed by Mr. Rakesh Agarwal and Mr. Anand Bansal, who partners in the firm along with AR iron and Ispat Pvt. Ltd. The company has strong support from management as they bring along a cumulative 2 decades of experience in the related field. The company is in existence for 3 years and has seen a complete business cycles. The company has extensive experience of promoters along with healthy relationship with customer and supplier which it has built over the years.
Scale of Operations :
The Operating Income has increased to Rs 229.52 Cr in FY 21 as compared to Rs 109.13 Cr in FY 20. Due to management efforts, dedicated skilled employees with cost effectiveness and qualitative procurement of Raw materials with welled stock management via reliable and trusted vendors and customers. It is further expected to increase as per projections of FY 22 and FY 23 also. Due to the addition of 3rd furnace & Slag Crusher. The company has achieved sales of Rs 92.65 Cr from April 2021 to August 2021, continuing with this trend the company will be able to achieve the sales of Rs 360.39 Cr in FY 22 as per projections.
Moderate Networth and debt protection metrics :
The TNW of the company is on an increasing trend and has increased to Rs 12.89 Cr in FY 21 as compared to Rs 7.07 Cr in FY 20. The DSCR and ISCR of the company stand at 1.47 and 3.92 respectively in FY 21 indicating company’s adequacy to meet its debt obligations
Moderate Net Profit Margin and Current Ratio :
The NPM is at moderate level and has increased to 1.10% in FY 21 as compared 0.26% in FY 20. But is declining in FY22 to 0.60%. At the same time the current ratio has declined to 2.27x in FY 21 as compared to 3.22x in FY 20. But is at moderate levels and is expected to decline to 1.58x in FY 22

Credit Risks:

Declining Operating Profit Margin :
There is a sharp decline in the OPM to 2.07% in FY 21 as compared to 4.77% in FY 20 respectively. It is further expected to marginally increase to 2.33% as per FY 22 projections
Track Record and cyclical nature of industry :
Short operational track record of the firm, since commercial operations commenced in June 2019. At the same time the company is exposed to the cyclicality inherent to the steel industry, which limits the pricing flexibility of the industry participants. Highly competitive and fragmented nature of the industry.
Impact of COVID 19 :
The industry is exposed to the negative impact of COVID 19 & lockdown on all the business parameters in FY21.
High Gearing Ratios :
The TD/TNW and TOL/TNW stand at 1.33x and 1.42x respectively in FY 21. However the gearing ratios are increasing in FY 22 1.19x and 2.12x respectively because of increased borrowings.

ANALYTICAL APPROACH - Standalone

BWR has factored in the standalone business parameters and financial risk profile of the company to arrive at the rating. Reference may be made to the Rating Criteria hyperlinked detailed below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Going forward, the ability of the entity to accelerate its scale of operations, increase its profit margins, compliance of bank's sanction terms, efficiently manage its working capital and cash flows for timely servicing of interest/debt obligations and strengthening of overall financial risk profile shall be the key rating sensitivities over short to medium term.

Positive: The rating outlook may be revised to positive or rating may be upgraded if the company is able to sustain its growth and profit margins. Any additional infusion of share’s capital would help to improve its capital structure of the entity.

Negative: The rating outlook may be revised to negative or rating may be downgraded if the entity achieves lower revenue and profit margins than projected.

LIQUIDITY INDICATORS - Adequate

The cash and cash equivalents of AR Ispat stands at Rs 2.15 Cr in FY21. The current ratio of the company stands at 2.27x in FY21. Its average monthly bank CC utilization stood at 22.61 %

ABOUT THE ENTITY

Incorporated in 2018 and based in Raigarh (Chhattisgarh), AR Ispat is partnership firm managed by Mr. Rakesh kumar Agarwal, and Mr. Anand Bansal. Firm is into manufacturing of Ms Billets, and has a capacity of 30000 mtpa. The commercial production of the company has started from 15th June 2019.

Ar Ispat Manufacture High-Quality Replacement chilled Rolls for Roller Mill and Flaking Mill .They cast iron roll used in Feed mill, Flour, steel industries and Industrial Applications and all this could only happen with the help of their management and employees hard work, dedication and the tremendous effort to achieve our common goal i.e. strive to provide the best solution to our clients

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	229.52	109.13
EBITDA	Rs.Crs.	4.75	5.20
PAT	Rs.Crs.	2.53	0.28
Tangible Net Worth	Rs.Crs.	12.89	7.07
Total Debt/Tangible Net Worth	Times	1.33	2.64
Current Ratio	Times	2.27	3.22

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	32.01	BWR BB+/Stable (Upgrade)	19May2020	BWR BB (Stable) (Upgradation )	03Apr2019	BWR BB-(Stable) (Assigned )	NA	NA
Grand Total		32.01	(Rupees Thirty Two Crores and One lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - NA

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
Mrigank Tripathi Ratings Analyst mrigank.t@brickworkratings.com	Sushil Kumar Chitkara Director - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

AR Ispat

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	20.00	_	20.00
2	Punjab National Bank	Term Loan - Sanctioned	5.61	_	5.61
3	Punjab National Bank	Term Loan - Sanctioned	5.00	_	5.00
4	Punjab National Bank	GECL - Sanctioned	1.40	_	1.40
Total			32.01	0.00	32.01
TOTAL (Rupees Thirty Two Crores and One lakhs Only)

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Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

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