RATING RATIONALE
19Jan2022

Avadh Rail Infra Ltd

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs.69.27Crs of Avadh Rail Infra Ltd.

Particulars
Facilities** Amount (Rs.Crs.) Tenure Rating#
Previous Present Previous
(18 Feb 2021)
Present
Fund Based 36.77 34.27 Long Term BWR BBB-/Stable
Reaffirmation
BWR BBB - /Stable
Reaffirmation
Non Fund Based 35.00 35.00 Short Term BWR A3
Reaffirmation
BWR A3
Reaffirmation
Grand Total 71.77 69.27 (Rupees Sixty Nine Crores and Twenty Seven 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 in the ratings of Avadh Rail Infra Ltd (ARIL, or ‘the company’), factors in the improved PBILDT margins over the previous year and satisfactory debt protection metrics. The ratings continue to derive comfort from the promoters’ extensive business experience in railway wagon parts manufacturing industry, established relationships with reputed customers namely, the Indian Railways and metro rail corporations, with a comfortable order book position. The ratings, however, are constrained by the decline in scale of operations in FY21 (though recovery experienced in FY22, so far) , customer concentration risks, and risks arising out of substantial investments in sister concerns.

Rating Outlook: Stable

BWR believes ARIL's business risk profile is likely to 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' if 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.

 

KEY RATING DRIVERS

Credit Strengths:


Credit Risks:

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology on a standalone basis as detailed in the Rating Criteria detailed below.

RATING SENSITIVITIES

Positive: Significant growth in the scale of operations, coupled with an improvement in the profitability margins and solvency profile will remain positive for the company.

Negative: BWR may revise the ratings downwards if there is a consistent decline in the scale of operations of the company coupled with a significant deterioration in the solvency profile. Increased outflow towards the group entities or non-core assets shall also be negative for the company.

 

LIQUIDITY INDICATORS - Adequate

An adequate liquidity as indicated by Current ratio 2.42x, as on March 31, 2021. Further, the average utilization of its cash credit limits stood at a comfortable level of around 7% in the past 12 months from Jan 2021 to Dec 2021. Low limit utilization levels provide a liquidity buffer to the company in case any need arises in the future. The company has been generating adequate cash accruals to service its debt obligation in the past. It generated net cash accruals of around Rs.9.12 Crs in FY21 vis-a-vis repayment obligation of 2.38Cr. in FY21. The company has a repayment obligation of Rs.7.03Crs in FY22, which is expected to be met through its cash accruals. The company plans to incur a capex (of ~Rs.20-25Cr.) in the period of next 2-3 years for which they plan to avail a term loan of ~Rs7-8Crs. However, as of now the management doesn't have any concrete plans pertaining to the same.

ABOUT THE ENTITY

Avadh Rail Infra Limited (ARIL) was established Avadh Rubber Ltd and was incorporated on 23 July 1980.ARIL Indian Railways’ foremost manufacturer and RDSO approved supplier for critical rubber and rubber-to-metal bonded components for freight wagons, passenger coaches, locomotives and tracks. The company has its own R&D and technical collaborations with renowned railway infrastructure providers worldwide like Alstom, Delkor, Galland etc. ARIL has four production units in Lucknow, Chennai and 2 in Haridwar. All units are ISO-9001: 2008 certified.

 

KEY FINANCIAL INDICATORS (Standalone)
Key Parameters Units FY 20-21
(Audited)
FY 19-20
(Audited)
Operating Revenue Rs.Crs. 146.40 185.06
EBITDA Rs.Crs. 14.20 16.68
PAT Rs.Crs. 5.16 6.54
Tangible Net Worth Rs.Crs. 64.96 59.80
Total Debt/Tangible Net Worth Times 0.68 0.85
Current Ratio Times 2.42 1.64

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)
Facilities Current Rating (2022) 2021 2020 2019
Type Tenure Amount
(Rs.Crs.)
Rating Date Rating Date Rating Date Rating
Fund Based LT 34.27
BWR BBB-/Stable
(Reaffirmation)
18Feb2021
BWR BBB-Stable
(Reaffirmation)
NA
NA
30Dec2019
BWR BBB-Stable
(Upgrade)
Non Fund Based ST 35.00
BWR A3
(Reaffirmation)
18Feb2021
BWR A3
(Reaffirmation)
NA
NA
30Dec2019
BWR A3
(Upgrade)
Grand Total 69.27 (Rupees Sixty Nine Crores and Twenty Seven 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

Neha Jain

Senior Rating Analyst Board : +91 11 2341 2232 neha.j@brickworkratings.com

Sudeep Sanwal

Associate Director - Ratings sudeep.s@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com
Avadh Rail Infra 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 Union Bank of India Cash CreditSanctioned 25.00 _ 25.00
2 Union Bank of India Bank GuaranteeSanctioned _ 35.00 35.00
3 Union Bank of India GECLSanctioned 8.58 _ 8.58
4 Union Bank of India Common Covid Emergency Line of Credit (CCECL)Sanctioned 0.69 _ 0.69
Total 34.27 35.00 69.27
TOTAL (Rupees Sixty Nine Crores and Twenty Seven lakhs Only)
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