Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 24.94 Crs. of Ali Afzal Flour Mill Limited
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (17 Jun 2021) |
Present | ||
| Fund Based | 25.60 | 24.94 | Long Term |
BWR BB- /Stable
Downgrade/ISSUER NOT COOPERATING* |
BWR BB
/Stable Upgrade |
| Grand Total | 25.60 | 24.94 | (Rupees Twenty Four Crores and Ninety Four lakhs Only) | ||
BWR has upgraded the ratings of Ali Afzal Flour Mill Limited to BWR BB/ Stable . The upgrade of rating reflects the long standing experience of the promoters in the Agro based industry, company’s locational advantage with regards to abundant supply of wheat and good growth prospects in its revenue after capacity enhancement from 120 MT/day to 490 MT/day. The rating is, however, constrained by the weak financial risk profile and low net margins and existence of a large number of players in a highly competitive and fragmented market.
The ‘stable’ outlook indicates a low likelihood of a rating change in the medium term. BWR expects that the firm’s performance is likely to be maintained over the next few years.
Credit Strengths:
The company is located in Barabanki , UP and thus has a competitive advantage in terms of skilled labor, logistics, production knowledge and availability of wheat in abundance making the company more efficient and cost effective.
The total operating income of the company has increased substantially and is growing on a y-o-y basis to Rs. 102.18 Crores in FY21 from Rs. 52.42 crores in FY20 on account of expansion of plant . The company has started the new Plant which is operational from Jan 2020 with the installed capacity of 370 MT/day. The flour mill has enhanced its installed capacity from 120 MT/day to 490 MT/day overall.
In FY21, The operating revenues of the company increased by almost 100 % in vis-a-vis FY20. There has been a continuous increase in revenues from the previous FYs. Though, the risk is partially mitigated by the fact that the scale of operation is growing continuously. The company has achieved the revenue of Rs. 75.00 Crores till 31st Oct 2021 and expected to achieve the revenue of Rs. 136.35 Crores in FY22(Proj).
The company has been in existence for 16 years and has seen complete business cycles. The promoters have extensive experience in the agro industry.
The financial risk profile stood average in FY21 marked by Networth of Rs. 8.69 Crores which is supported by Unsecured loans of Rs. 6.00 Crores from promoters and family and friends. The profitability margins of the company marked by Operating profit margins stood at 5.28 % in FY21 as compared to 4.10% in FY20. The DSCR and ISCR of the company stand at 3.65x and 1.53x respectively in FY21. The company’s conversion cycle stood 52 days and the current ratio stood at 1.30 times in FY21.
The industry is regulated by the government. Any changes in existing regulatory framework/ environment may adversely affect the profitability of the company.
The flour milling industry is highly competitive with a presence of a large number of organized and unorganized players. The company’s profitability margins are vulnerable to raw material price trends on account of its inability to pass on increased raw material costs. However, the same is partially mitigated by the short conversion cycle and fast moving nature of the product.
For arriving at its ratings, BWR has considered the standalone financials of the Company . BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale)
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 a substantial fall in the company's revenue delays in the loan repayments and deterioration in the overall financial risk profile.
LIQUIDITY INDICATORS - Adequate
BWR believes that the company’s liquidity is adequate which is marked by net cash accruals of Rs. 3.82 Crores in FY21. The cash accruals for FY20 were Rs.1.42 Crores and have increased in FY21 due to a growth of almost 50% in sales. The unencumbered cash and cash equivalents is Rs. 0.71 Cr for FY21. The Current ratio of the company is at 1.30 times and gearing ratio (Analyzed) of the company stands at 2.44 times for FY21 . The debt protection metrics marked by ISCR stood at 2.72 x and DSCR at 1.53 x for FY21 . The term debt obligation of Long Term debt for FY21 is Rs. 2.46 Cr and Rs. 2.88 Cr in FY22 (Proj) and Net Cash accruals (PAT+Dep.) for FY22 (Proj) is Rs. 5.48 Crs and Rs. 5.27 Crs in FY23 (Proj) . Average credit utilization for last 6 months as per the banker’s feedback is 65 %. The company’s liquidity is expected to be adequate in the short to medium term which is supported by the unutilized bank lines and unsecured loans from the promoters and their family
Therefore, the overall liquidity position is Adequate.
ABOUT THE ENTITYM/S Ali Afzal Flour Mill was formed as a partnership firm on 19 March 2005. w.e.f. 23 Aug 2016, the firm was registered as a limited company in the name of Ali Afzal Flour Mill Limited. The company undertook an expansion of its milling capacity in 2019 by 370 tonnes /day to reach the total capacity of 570 tonnes/day at its flour milling plant in Barabanki, UP. The plant is established in an area of 1.26 acres of land which is owned by one of the promoters. The company processes and sells these products: Aatta, Chokar, Bran, Maida, Suji, Bardana etc.
KEY FINANCIAL INDICATORS (Standalone)
| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 102.18 | 52.42 |
| EBITDA | Rs.Crs. | 5.40 | 2.15 |
| PAT | Rs.Crs. | 0.19 | 0.24 |
| Tangible Net Worth | Rs.Crs. | 8.69 | 5.79 |
| Total Debt/Tangible Net Worth | Times | 3.65 | 3.52 |
| Current Ratio | Times | 1.30 | 1.02 |
NA
NA
ANY OTHER INFORMATIONNA
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)| 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 | 24.94 |
BWR BB/Stable
(Upgrade) |
17Jun2021 |
BWR BB- Stable
(Downgrade/ISSUER NOT COOPERATING*) |
14May2020 |
BWR BBStable
(Upgrade) |
08Feb2019 |
BWR BB- Stable
(Assignment) |
NA |
NA
|
| Non Fund Based | ST | NA |
NA
|
NA |
NA
|
NA |
NA
|
08Feb2019 |
BWR
() |
NA |
NA
|
| NFB SubLimit | ST | NA |
NA
|
NA |
NA
|
14May2020 |
BWR Withdrawn
(Withdrawal) |
08Feb2019 |
BWR A4
(Assignment) |
NA |
NA
|
| Grand Total | 24.94 | (Rupees Twenty Four Crores and Ninety Four 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 | Indian Bank | Term LoanOut-standing | 7.34 | _ | 7.34 | |
| 2 | Indian Bank | Cash CreditSanctioned | 15.00 | _ | 15.00 | |
| 3 | Indian Bank | GECLSanctioned | 2.60 | _ | 2.60 | |
| Total | 24.94 | 0.00 | 24.94 | |||
| TOTAL (Rupees Twenty Four Crores and Ninety Four lakhs Only) | ||||||
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