RATING RATIONALE
18Oct2021

Atam Manohar Ship Breakers Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 99.85 Crs. of Atam Manohar Ship Breakers Pvt. Ltd.(AMSBPL or "The Company")

Particulars
Facilities** Amount (Rs.Crs.) Tenure Rating#
Previous Present Previous
(20 Oct 2020)
Present
Fund Based (10.27) (10.27) Long Term BWR BB-/Stable
Reaffirmation
BWR BB - /Stable
Reaffirmation
(0.00) (4.73)
Non Fund Based 69.85 99.85 Short Term BWR A4
Reaffirmation
BWR A4
Reaffirmation
Grand Total 69.85 99.85 (Rupees Ninety Nine Crores and Eighty Five 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

The reaffirmation of the rating continues to factor in more than 2 decades of experience of the promoters in the ship breaking industry and average financial risk profile marked by moderate debt protection metrics. These strengths are partially offset by the relatively modest size of operations of the company, cyclicality associated with the ship breaking business, high reliance on Letter of Credit backed purchases, exposure to environmental and regulatory risk and susceptibility of profitability margins to adverse exchange rate fluctuations and volatile metal prices.

BWR believes the AMSBPL business risk profile will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term.

KEY RATING DRIVERS

Credit Strengths:


Credit Risks:

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has assessed the standalone financials of AMSBPL and has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale)

RATING SENSITIVITIES

Positive: Sustained improvement in profit margins leading to an improvement in the credit metrics will be positive for the ratings.

Negative: Deterioration in the scale of operations, Decline in operating margins and a stretch debt indicators or working capital cycle will be negative for the ratings.

LIQUIDITY INDICATORS - Stretched

The current ratio of the company stood at 1.13 times in FY21 (A) as against 2.01 times in FY20 on account of ship acquisition leading to higher trade payables . Cash & cash equivalent as of 31-March-2021 stood at Rs. 0.09 Cr and amount in fixed deposit account stood at Rs. 22.35 Crs (Fixed deposit amount of Rs. 13.73 is completely pledged). The Op. EBITDA/Finance Cost fell to 0.83x in FY21 (FY20: 1.84x) the lower Operating margins due to fall in realization per ton and rise in finance cost on account of higher unsecured loans led to deterioration in ISCR. The leverage and coverage ratios are likely to remain the same in the near term. For FY22 the company had LC repayment obligation of Rs. 88 Crs; of this the company has cleared Rs. 57 Crs. of the repayment obligation during H1FY22 and the rest Rs. 31 Crs. payment would be done in the months of October and November. The company manages short term cash flow mismatches by taking overdraft facility against the long term FDR’s. The average working capital utilisation for seven months ended September 2021 was 62.96%.

ABOUT THE ENTITY

Established in 1997, AMSBPL is engaged in ship breaking and recycling business. The Company’s registered office is at Bhavnagar, Gujarat and operates in Alang (plot of 3700 sq mts). The Company is promoted by Mr. Anil Jain having extensive experience in the business. The company has a capacity to break ships ranging up to 50000 tonnes.

KEY FINANCIAL INDICATORS (Standalone)
Key Parameters Units FY 20-21
(Audited)
FY 19-20
(Audited)
Operating Revenue Rs.Crs. 93.61 71.07
EBITDA Rs.Crs. 2.07 2.45
PAT Rs.Crs. 1.20 0.74
Tangible Net Worth Rs.Crs. 17.67 16.47
Total Debt/Tangible Net Worth Times 0.44 0.40
Current Ratio Times 1.14 2.07

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 NA
NA
NA
NA
30Sep2019
BWR BB-Stable
(Upgrade)
12Sep2018
BWR B+Stable
(Reaffirmation)
FB SubLimit LT (10.27)
BWR BB-/Stable
(Reaffirmation)
20Oct2020
BWR BB-Stable
(Reaffirmation)
NA
NA
NA
NA
NA
18Jun2020
BWR BB-Stable
(Reaffirmation)
NA
NA
NA
NA
(4.73)
BWR BB-/Stable
(Reaffirmation)
NA
NA
NA
NA
NA
NA
Non Fund Based ST 99.85
BWR A4
(Reaffirmation)
20Oct2020
BWR A4
(Reaffirmation)
30Sep2019
BWR A4
(Reaffirmation)
12Sep2018
BWR A4
(Reaffirmation)
NA
18Jun2020
BWR A4
(Reaffirmation)
NA
NA
NA
NA
Grand Total 99.85 (Rupees Ninety Nine Crores and Eighty Five 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

Sagar Harendra Desai

Ratings Analyst sagar.d@brickworkratings.com

Chintan Dilip Lakhani

Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com
Atam Manohar Ship Breakers 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 CreditSanctioned _ 68.50 68.50
Sub-Limit (CC Limit) Sanctioned (10.27)
Sub-Limit (CC Limit) Proposed (4.73)
2 State Bank Of India (SBI) Letter of CreditProposed _ 30.00 30.00
3 State Bank Of India (SBI) Credit Exposure Limit (CEL)Sanctioned _ 1.35 1.35
Total 0.00 99.85 99.85
TOTAL (Rupees Ninety Nine Crores and Eighty Five lakhs Only)
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