Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 95.07 Crs. of AMD Industries Ltd.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (27 Oct 2020) |
Present | ||
Fund Based | 63.55 | 74.07 | Long Term |
BWR BBB- /Stable
Reaffirmation |
BWR BBB -
/Stable Reaffirmation |
Non Fund Based | 21.00 | 21.00 | Short Term |
BWR A3
Reaffirmation |
BWR A3
Reaffirmation |
Grand Total | 84.55 | 95.07 | (Rupees Ninety Five Crores and Seven lakhs Only) |
The reaffirmation in the rating continues to draw comfort from the long track record of company’s operations, extensive industry experience of the promoters, established relationships with its clients, comfortable net worth and gearing, increase in capacity over the years and diversified product portfolio. The ratings are, however, constrained by moderate debt protection metrics, moderate and stagnant scale of operations, low capacity utilization leading to weak ROCE (return on capital employed) ratio, volatility in raw material prices and stiff competition in the industry.
Rating Outlook
BWR believes that AMD Industries Ltd.’s (AMDIL) business risk profile will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term on account of sustained scale of operations in the past and above Rs 160 Crs and enhanced capacity which can increase scale of operations in the medium term due to stable demand. For arriving at the rating, BWR has relied upon the audited financials upto FY21 and H1FY22 (unaudited)and projections for FY22 and FY23 and the information provided by the company and also available in the public domain. KEY RATING DRIVERSCredit Strengths:
The company has a long track record since 1983 and promoters have extensive experience of more than three decades in running the company.
AMDIL is associated with well reputed corporate clients indicating sound technical and design capabilities of the company. The company is now India’s top Beverage packaging company supplying finished products to multinational companies like Coca Cola, Pepsi, South African Breweries (SAB), United Breweries (UB) Dabur, HLL, Hamdard etc. as well as numerous large indigenous beverage pharma and healthcare companies.
The company has a moderate tangible net worth indicated by equity and reserves of Rs.131.86 crores in FY21 as against Rs 128.67 crores as in FY20 .Company’s Gearing ratio viz TD/TNW is comfortable at 0.40 x in FY21 (PY: 0.37x). AMDIL’s debt stood at Rs 53.20Cr as on end-FY21, translating into a debt to EBITDA ratio of 0.23x.
Debt protection metrics as indicated by ISCR (interest service coverage ratio) and DSCR (debt service coverage ratio) has marginally declined to 2.11x and 1.19x respectively in FY21 as against ISCR and DSCR of 2.59x and 1.21x in FY20 driven by steep decline in EBITDA in FY21. The company’s cash conversion cycle (CCC) of the company has increased to 150 days in FY21 from 85 days in FY20. The increase is on account of increased receivable days of 356 days in FY21 from 292 days in FY20 impacted due to COVID 19 related disruption. However, CCC is projected to truncate to 123 days in the near term.
Total Operating Income of the company has remained low, stagnant and range-bound between Rs 155 crores to Rs 170 crores until FY20. During FY 21 the Company has registered total revenue of Rs. 118.61 Crs as compared to previous year’s revenue of Rs.174.55 Crs registering a degrowth of approx. 32.04% over the previous year. The southward movement in the revenues has primarily been on account of COVID 19 related trade disruptions and complete closure of the manufacturing unit in Q1FY21. Furthermore, till H1FY22 the company has registered a revenue of Rs.88.90 Crs ( PY: Rs.47.75Crs) and unpublished revenue of Rs.119.74Crs until Q3FY22. The Company is expected to generate operating income of Rs 169 Crs in current financial year on account of commencement of new closure line, installation of new juice line and expectation of enhanced capacity in container division , but any shortfall in revenue in Q4 FY22 can strain the debt protection metrics in FY 22 and would be key monitorable.
The company is exposed to raw material fluctuation risks which is likely to affect the profitability margins further as raw material prices are linked to crude oil prices. AMDIL’s EBITDA margin was 8.30% in H1FY21, as against 10.215 in FY21 and 11.37% in FY20.
Stiff competition from the well established players in the market limits the pricing power of AMDIL. The company manufactures closures, such as crown caps and plastic caps for bottles and containers for beverages, liquor, food products. Company's scale of operations may witness a decline, if there is a significant shift towards newer packaging products, such as tetra packs, sachets, strips, and other flexible packaging, by end-user industries in the medium term.
BWR has considered the standalone business and financial risk profile of the Company, as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Positive: BWR may revise the ratings upward if there is a sustained improvement in the company's credit profile coupled with the ability to achieve optimal capacity utilisations in its newly added capacities resulting in the substantial and sustained improvement in the scale of operations.
Negative: BWR may revise the ratings downwards if there is a sustained deterioration in the company’s EBITDA, debt protection metrics and liquidity and an increase in the leverage and gearing beyond envisaged levels, compared with current expectations.
LIQUIDITY INDICATORS - Adequate
The liquidity position of the company continues to remain moderate as indicated by the current ratio of 1.22x in FY21 (PY: 1.25x). The company had generated cash accruals of Rs 13.14 Crs coupled with cash flow from operations at Rs.16.42Crs in FY21 against long term repayment obligation of Rs.9.64Crs in FY21. Further, the average EBITDA generated for FY 18~21 stood at Rs.15.41Crs against the average interest cost of Rs.7.74Crs for the same period. Further, BWR expects the company to generate an adequate cash accrual of Rs.13.8Crs against repayment obligation of Rs.10.03Crs for FY22. Due to the working capital intensive nature of business operations the cash conversion cycle of the company is elongated to 150 days in FY21. The working capital requirements of the company are also funded by need-based unsecured loans availed from promoters from time to time coupled with average utilization of 40% of the fund based limits which provides cushion to the liquidity and head room for the need-based usage.
ABOUT THE ENTITYAMD Industries Limited, founded in 1983, is one of the leading business houses in the field of packing solutions. They provide packaging solutions to most of the successful and well established companies engaged in beverages, liquor and processed foods ranging from small ventures to industry majors.The company has three product lines which include crown caps (metallic closures for glass bottles ), PET Preforms and plastic closures . The company has manufacturing facilities based at Neemrana (Rajasthan ) . Mr. Ashok Gupta and Mr. Adit Gupta are directors of the company . The Company is listed on BSE and NSE.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 118.61 | 174.55 |
EBITDA | Rs.Crs. | 12.65 | 17.81 |
PAT | Rs.Crs. | 3.11 | 5.18 |
Tangible Net Worth | Rs.Crs. | 131.86 | 128.67 |
Total Debt/Tangible Net Worth | Times | 0.40 | 0.37 |
Current Ratio | Times | 1.22 | 1.25 |
Nil
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 | 74.07 |
BWR BBB-/Stable
(Reaffirmation) |
NA |
NA
|
27Oct2020 |
BWR BBB- Stable
(Reaffirmation) |
22Aug2019 |
BWR BBB-Stable
(Reaffirmation) |
Non Fund Based | ST | 21.00 |
BWR A3
(Reaffirmation) |
NA |
NA
|
27Oct2020 |
BWR A3
(Reaffirmation) |
22Aug2019 |
BWR A3
(Reaffirmation) |
Grand Total | 95.07 | (Rupees Ninety Five Crores and Seven 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 CriteriaAnalytical Contacts | |
---|---|
Neha Jain Senior Rating Analyst Board : +91 11 2341 2232 neha.j@brickworkratings.com |
Tanu Sharma Director - Ratings tanusharma@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 | Axis Bank Ltd. | Term LoanOut-standing | 12.33 | _ | 12.33 |
2 | Axis Bank Ltd. | Cash CreditSanctioned | 9.00 | _ | 9.00 |
3 | Kotak Mahindra Bank | Cash CreditSanctioned | _ | _ | 0.00 |
4 | Kotak Mahindra Bank | Term LoanOut-standing | 12.07 | _ | 12.07 |
5 | Kotak Mahindra Bank | BG/LC/ILCSanctioned | _ | _ | 0.00 |
6 | State Bank Of India (SBI) | BG/LC/ILCSanctioned | _ | 15.00 | 15.00 |
7 | State Bank Of India (SBI) | Term LoanOut-standing | 3.67 | _ | 3.67 |
8 | State Bank Of India (SBI) | Cash CreditSanctioned | 15.00 | _ | 15.00 |
9 | TATA Capital Financial Services Limited | Inventory Funding FacilitySanctioned | 3.00 | _ | 3.00 |
10 | Yes Bank | BG/LC/ILCSanctioned | _ | 6.00 | 6.00 |
11 | Yes Bank | Cash CreditSanctioned | 12.00 | _ | 12.00 |
12 | Yes Bank | Term LoanOut-standing | 7.00 | _ | 7.00 |
Total | 74.07 | 21.00 | 95.07 | ||
TOTAL (Rupees Ninety Five Crores and Seven lakhs Only) |
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