Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 24.90 Crs. of Agarwal Ferro Metallic Pvt Ltd
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (01 Jun 2021) |
Present | ||
| Fund Based | 22.30 | 24.90 | Long Term |
BWR B+/Stable
Downgrade/ISSUER NOT COOPERATING* |
BWR BB -
/Stable Upgrade |
| Non Fund Based | (1.50) | (1.50) | Short Term |
BWR A4
Reaffirmation/ISSUER NOT COOPERATING* |
BWR A4
Reaffirmation |
| Grand Total | 22.30 | 24.90 | (Rupees Twenty Four Crores and Ninety lakhs Only) | ||
BWR has upgraded/reaffirmed the ratings of Agarwal Ferro Metallic Pvt Ltd (AFMPL) to BWR BB- (Stable)/A4. The upgradation/reaffirmation in the ratings reflect the extensive experience of the promoters, Satisfactory net worth ,comfortable current ratio, and moderate gearing levels. However, the ratings are constrained by low profitability margins, below benchmark debt coverage metrics, high industry risk, and geographical concentration risk.
The ‘stable’ outlook indicates a low likelihood of the rating change over the medium term. BWR believes that AFMPL will continue to benefit from the extensive experience of the promoters.
KEY RATING DRIVERSCredit Strengths:
The management of the company includes five directors namely, Mr. Deepak Agarwal, Mr. Abhinav Agarwal, Mr. Suresh Chand Agarwal, Mr. Mirdul Agarwal and Mr. Mukul Agarwal with their extensive experience and knowledge of the industry, they are able to maintain long term relationships with their clients and suppliers and give an edge to the company over other players in the industry.
The financial risk profile of the company has improved over the years as evidenced by a comfortable gearing ratio(Analyzed) of 1.83 times in FY21 (Prov) as compared to 1.64 times in FY20. The tangible net worth stood at Rs. 12.56 Cr. in FY21 (Prov). The debt protection metrics stood with an ISCR of 0.93 times and DSCR of 1.02 times in FY21 (Prov). The company has a comfortable current ratio of 1.85 times in FY21 (Prov).
Credit Risks:
The total operating income of the company has slightly declined to Rs. 100.75Cr in FY21 (Prov) from Rs. 171.11 Cr in FY20 due to the lower order execution during the year due to the lockdown COVID-19 pandemic resulting to halt in the working and operations of the company . Till 21st Aug 2021 , the company has achieved the total revenue of Rs. 37.00 Cr and hopes to achieve the projected numbers of Rs.125.00 Crs in FY22. The company’s profitability margins have also slightly declined as evident from the OPM and NPM of 2.68% and 1.24% respectively in FY-21(Prov) as against 3.05 % and 0.56 % respectively in FY20.
The Indian Steel Industry continues to grapple with uncertainties pertaining to the availability and consistent supplies of raw materials i.e. both coal and iron ore still remain a challenge.
The customers and suppliers, both are based in Aligarh (Uttar Pradesh) and as such there is concentration risk. Any area specific issue may adversely affect the business activity.
For arriving at its ratings, BWR has considered the standalone financials of the firm. BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale)
RATING SENSITIVITIES
Going forward, the ability of the company to sustain growth in the topline, improve profitability margins, improve the financial risk as well as liquidity risk profile will be the key rating sensitivities.
Positive: The rating may be upgraded when there is any substantial increase in the turnover, profitability margins and improvement in the overall financial risk profile and liquidity profile.
Negative: The rating may be downgraded if there is any steep decline in the receipts, profitability margins, gearing and deterioration in the overall financial risk profile.
LIQUIDITY INDICATORS - Adequate
The unencumbered cash and cash equivalents is Rs. 0.22 Cr for FY21 (Prov). The Current ratio of the company is above the benchmark at 1.85 times and gearing ratio (Analyzed) of the company is stood at 1.83 times for FY21 (Prov). The debt protection metrics stood moderate marked at ISCR at 0.93x and DSCR at 1.02x for FY21(Prov) . The term debt obligation of Long Term debt for FY21(Prov) is Rs. 1.99 Cr and Net Cash accruals (PAT+Dep.) for FY21 (Prov) is Rs.2.83 Crs. Average credit utilization for last 6 months as per the banker’s feedback is 90 %.
Therefore, the overall liquidity position is adequate.
ABOUT THE ENTITYIncorporated in 2006, Agarwal Ferro Metallic is a Aligarh, Uttar Pradesh based closely held private limited company engaged in manufacturing and trading of TMT bars, ingots and other allied products. The furnace and the rolling mill of the company is located in Aligarh only with an installed capacity of 16000 and 36000 tons per year respectively. The company is promoted by the Agarwal family of Aligarh and the promoters have over three to five decades of experience in the line of business.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 172.10 | 173.93 |
| EBITDA | Rs.Crs. | 5.25 | 5.54 |
| PAT | Rs.Crs. | 0.96 | 0.97 |
| Tangible Net Worth | Rs.Crs. | 11.32 | 10.36 |
| Total Debt/Tangible Net Worth | Times | 2.89 | 3.61 |
| Current Ratio | Times | 1.49 | 1.42 |
| 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 | 24.90 |
BWR BB-/Stable
(Upgrade) |
01Jun2021 |
BWR B+Stable
(Downgrade/ISSUER NOT COOPERATING*) |
17Apr2020 |
BWR BB-Stable
(Upgrade) |
11Jan2019 |
BWR B+Stable
(Upgrade) |
NA |
NA
|
| NFB SubLimit | ST | (1.50) |
BWR A4
(Reaffirmation) |
01Jun2021 |
BWR A4
(Reaffirmation/ISSUER NOT COOPERATING*) |
17Apr2020 |
BWR A4
(Reaffirmation) |
11Jan2019 |
BWR A4
(Reaffirmation) |
NA |
NA
|
| Grand Total | 24.90 | (Rupees Twenty Four Crores and Ninety 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 | |
|---|---|
|
Nisha Nagar Ratings Analyst nisha.n@brickworkratings.com |
Hari Kishan Yadav Associate Director - Ratings hari.ky@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 | Canara Bank | Cash CreditSanctioned | 17.00 | _ | 17.00 | |
| Sub-Limit (Letter of Credit) Sanctioned | (1.50) | |||||
| 2 | Canara Bank | Term LoanSanctioned | 7.90 | _ | 7.90 | |
| Total | 24.90 | 0.00 | 24.90 | |||
| TOTAL (Rupees Twenty Four Crores and Ninety lakhs Only) | ||||||
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