Pentagon Assembly Automation Pvt. Ltd.

Brickwork Ratings removes the rating from Issuer Not-Cooperating category and upgrades the long term ratings for the Bank Loan Facilities of Rs. 29.68 Crs. of Pentagon Assembly Automation Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (21 Jun 2021)	Present
Fund Based	17.00	29.68	Long Term	BWR B+/Stable Downgrade/ISSUER NOT COOPERATING*	BWR BB /Stable Upgrade
Non Fund Based	(1.00)	(1.00)	Short Term	BWR A4 Reaffirmation/ISSUER NOT COOPERATING*	BWR A4 Reaffirmation
Grand Total	17.00	29.68	(Rupees Twenty Nine Crores and Sixty Eight 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

Brickwork Ratings removes the rating from the “Issuer Not-Cooperating” category and upgrades the long term ratings for the Bank Loan Facilities of Rs. 29.68 Crs of Pentagon Assembly Automation Pvt. Ltd.

Brickwork Ratings has upgraded the long term rating as BWR BB (Stable) and reaffirms the short term rating at BWR A4 for the Bank Loan Facilities of Rs.29.68 crores of Pentagon Assembly Automation Pvt. Ltd.

BWR believes that Pentagon Assembly Automation Pvt. Ltd business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term.

BWR has essentially relied upon the audited financial statements of Pentagon Assembly Automation Pvt. Ltdfor FY19, FY20, FY21, 10MFY22(Prov.) and projections of FY22 and FY23 and publicly available information and information/clarifications provided by the company's management.

The upgrade in the ratings takes into account improved operational and financial performance as reflected from higher turnover, improved margins with y-o-y increase in tangible net worth and net cash accruals.

The rating continues to draw strength from the established track record of operations with long-standing promoter experience, Growing scale of operations, Moderately comfortable capital structure and debt coverage indicators. The rating continues to remain constrained on account of customer and supplier concentration risk, Project execution and stabilization risk, Susceptibility to profit margins due to volatility in raw material prices and foreign currency fluctuation and Presence in highly competitive & fragmented industry.

KEY RATING DRIVERS

Credit Strengths:

Established track record of operations with long-standing promoters experience: :
PAAPL has an established track record of over 16 years of operations in assembling of machineries. The overall operations of AAPL are looked after by Mr. R.Radhakrishnan, Mr. T.Gnaneswara, Mr. James V. Joy and Mr. Monoi Mathew who possesses an extensive experience of an average of over two decades in the same line of business.
Growing scale of operations: :
The scale of operations of PAAPL grew with CAGR of 18.28% for past three ended FY21 and stood at Rs. 72.67 crore (vis-à-vis Rs.69.69 crore and Rs.50.12 crore in FY20 and FY19) on account of increase in order executions. Further during 10MFY22, PAAPL has reported revenue of Rs. 48.66 crore with an orderbook of Rs.88.85 crore out of which Rs.33.35 crore is to be executed by March 2023.
Moderately comfortable capital structure with debt coverage indicators: :
The capital structure of PAAPL i.e. Total Debt/Total Networth has stood at 1.77 times as on March 31, 2021 (vis-à-vis 1.08 times as on March 31, 2020) however the same has marginally deteriorated owing to availment of term loan for purchase of machineries. TNW has improved y-o-y and stood at Rs.11.49 Crs in FY21 as compared to Rs. 8.17 crs in FY20, on back of accretion of profits into the business.Debt protection metrics remain moderate with ISCR and DSCR at 9.16x and 2.19x as on March 31, 2021 (vis-à-vis 10.67x and 3.77x as on March 31, 2020).

Credit Risks:

Susceptibility to profit margins due to volatility in raw material prices and foreign currency fluctuation :

Susceptibility of profit margins to volatility in the raw material prices: The major raw materials required are SS and MS sheets which are fluctuating as per demand-supply factors with reference to copper and aluminum prices. PAAPLimports 5-10% of its raw material from china. However, the company naturally hedges its foreign exchange exposure through exports (contributes ~10%) which mitigates the fluctuation risk to an extent. Nevertheless the foreign exchange fluctuation risk continues to exist due to timing differences.
Presence in highly competitive & fragmented industry :
PAAPL operates in a highly fragmented market marked by the presence of a large number of players in the unorganized and organized sector, which accounts for high share of the total domestic turnover. Since the industry is highly competitive PAAPL has low bargaining power and as a result the company has to follows a competitive price strategy.
Project execution and stabilization risk: :

The PAAPL is undertaking a CAPEX at Plot No. 15 & 15A (Part), D-1 Block, MIDC, Pimpri Chinchwad Industrial Area, Akurdi, Pune – 411019 acquired by the company for manufacturing of assembly automation products i.e. Special Purpose Machinery, CNC Machine Tools, Press & Auto Components and allied activities as per customer’s specifications i.e. Existing line of business which is proposed to be completed by December 2022.. Hence the development in the project as proposed would remain a key rating concern.
Customer and supplier concentration risk: :

Over the years of operations,PAAPL has established long-term relationships with its customers. However, the customer and supplier profile remained well-concentrated with top 5 customers comprising ~80% of the total sales and top 5 suppliers comprising ~95% of total purchases in FY21.

ANALYTICAL APPROACH - Standalone

The ratings of PAAPL are arrived at on a standalone basis after independent evaluation of its financial risk profile. For arriving at its ratings, BWR has applied its rating methodology as detailed in the rating criteria hyperlinks.

RATING SENSITIVITIES

Positive: Significant growth in revenue and overall improvement in financial performance of the Company.

Negative: Lower than expected revenues affecting the profitability margins, coverage ratios, liquidity and gearing ratios are the key negative sensitivities.

LIQUIDITY INDICATORS - Adequate

The liquidity profile of the company remained adequate with cash and bank balance of Rs.3.61 crore as on March 2021 and Rs.0.71 crore as on 9MFY22. Its working capital utilization stood at 57.5% for the last eight months ended December 2021. Moreover, the company has net accruals stood at Rs.3.94 crore as on March 2021 with net worth base of Rs.11.49 Crore as on March 2021.

ABOUT THE ENTITY

Pentagon Assembly Automation Private Limited (PAAPL) was incorporated in 2006 as a private limited company. The PAAPL is engaged in manufacturing of assembly automation products i.e. Special Purpose Machinery, CNC Machine Tools, Press & Auto Components and allied activities as per customer’s specifications.The Product Portfolio of the company includes IV CATH – Final Assembly M/c, Tubeless Valve Assembly M/c, Quick Connector Assembly M/c., Lipstick Assembly M/c, Safety Slider Assembly M/c, Plunger Rod Assembly for PFS, High Speed Wad Insertion M/c, Blood Bag Needle Assembly. The Company caters to various customers across industries like medical, pharmaceuticals, rubber, automobile, electrical and electronics etc. Furthermore, the company generates 90% of the revenue from domestic clientele and 10% from export clientele based in Korea, Abu Dhabi, Vietnam, Riyadh, China, Russia and USA. The main raw materials required are Stainless steel and Mild steelsheets, plates, square tubes, C channels and round bars, which are majorly procured from local suppliers and dealers and ~5-10% from Imports from China, Germany, and Italy.

The corporate office and assembling facility of PAAPL is located under one roof in Bhosari, Pune (Maharashtra) which is spread across 26,000 sq. ft with separate design room, tool room, quality inspection room, control system workplace and assembly shop.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	72.06	69.69
EBITDA	Rs.Crs.	5.13	5.06
PAT	Rs.Crs.	3.09	2.72
Tangible Net Worth	Rs.Crs.	11.24	8.15
Total Debt/Tangible Net Worth	Times	1.83	1.08
Current Ratio	Times	0.81	1.00

KEY COVENANTS OF THE FACILITY RATED

NA.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

ACUITE B+ /A4 ; Issuer not co-operating as on October 29,2021 based on available information as the company has failed to provide information.

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	29.68	BWR BB/Stable (Upgrade)	21Jun2021	BWR B+Stable (Downgrade/ISSUER NOT COOPERATING*)	30Mar2020	BWR BB-Stable (Reaffirmation)	NA	NA
NFB SubLimit	ST	(1.00)	BWR A4 (Reaffirmation)	21Jun2021	BWR A4 (Reaffirmation/ISSUER NOT COOPERATING*)	30Mar2020	BWR A4 (Reaffirmation)	NA	NA
Grand Total		29.68	(Rupees Twenty Nine Crores and Sixty Eight 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
Durga Lalit Purohit Ratings Analyst durga.lp@brickworkratings.com	Ajit S Jagnade Senior Manager - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 ajit.j@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Pentagon Assembly Automation 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	Union Bank of India	Term Loan - Sanctioned	12.80	_	12.80
2	Union Bank of India	Term Loan - Sanctioned	11.30	_	11.30
3	Union Bank of India	Cash Credit - Sanctioned	4.49	_	4.49
4	Union Bank of India	GECL - Sanctioned	0.66	_	0.66
5	Punjab National Bank	Term Loan - Sanctioned	0.43	_	0.43
Total			29.68	0.00	29.68
TOTAL (Rupees Twenty Nine Crores and Sixty Eight lakhs Only)

Print and Digital Media

The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.

About Brickwork Ratings

Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

Disclaimer

Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.

BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR"s best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).

BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.

The ratings assigned by BWR are only an expression of BWR"s opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.

BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user"s financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.

BWR"s ratings reflect BWR"s opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.

Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.

BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR"s public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR"s rating criteria are also generally made available without charge on BWR"s website.

This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.

BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.