Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 160.96 Crs. of Mangalam Alloys Ltd.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (25 Nov 2020) |
Present | ||
Fund Based | 143.41 | 144.33 | Long Term |
BWR BBB/Stable
Reaffirmed |
BWR BBB
/Stable Reaffirmation |
Non Fund Based | 16.63 | 16.63 | Short Term |
BWR A3+
Reaffirmed |
BWR A3 +
Reaffirmation |
Grand Total | 160.04 | 160.96 | (Rupees One Hundred Sixty Crores and Ninety Six lakhs Only) |
BWR has reaffirmed its rating on the bank loan facilities of Mangalam Alloys Limited (MAL) at BWR BBB/Stable/ BWR A3+
The rating continues to reflect its promotes extensive experience in the industry and its diversified customers, suppliers portfolios, and its reach to multiple geographies. These strengths are partly offset by large working capital requirements and impact of COVID to the operations.
The outlook is retained at “Stable” since BWR expects that the business risk profile of MAL will be maintained over the medium term. The outlook may be revised to Positive in case of a sustained increase in scale of operations and higher than envisaged improvement in profitability resulting in strengthening of financial risk profile. The outlook may be revised to negative in case of decline in sales and profitability on a sustained basis, deterioration in the capital structure due to expected large debt-financed capital expenditure, further stretch in the conversion cycle, and weakening of the financial risk profile of the Company.
KEY RATING DRIVERSCredit Strengths:
The promoters have extensive experience in manufacturing metal products for industrial purposes. The promoters have more than 3 decades of experience in related industries. BWR believes the company will benefit from the promoter's experience in the long term.
The company manufactures more than 10 products and sells them to domestic as well as overseas. No customer contributes more than 10-15% hence, the company does not have any concentration risk on customer or geographical reach. The company has multiple suppliers option of procuring its raw material requirement, no lag time was observed in maintaining the inventory levels.
The company’s cash conversion cycle is of more than 120 days, due to large inventory holdings, and a igh credit cycle. The company provides credit upto 60-90 days and hol 2 months of inventory every month. The debtor days and inventory days were at 77 days and 142 days. Due to comfort received from suppliers in payment, the working capital requirement is moderately managed. Going forward, BWR believes any stretch in working capital requirements will impact its liquidity profile.
Due to the pandemic, the company reported degrowth in its topline from Rs 340 crores in fiscal 2020 to Rs 261 crores in fiscal 2021. The facilities were temporarily closed from April 2021 to June 2021 and were able to operate the factories at 7-80% capacity from OCtober 2021. Hence, due to lower capacity utilization profitability and topline was affected.
BWR has essentially relied upon the Standalone audited financial statements up to FY March 2020, as well as publicly available information and the information/clarification provided by the Company and the Lenders. The standalone approach has been adopted as there is no dependability on other group companies.
RATING SENSITIVITIES
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The liquidity is majorly supported by promoters' need-based fund support amid pandemic, earlier the cash generated from the business was adequate enough to cover its repayment obligation and any exigencies. Currently, the bank lines are moderately utilized less than 70% leaving a cushion to meet uncertainties. Further, the company is expected to report net cash accruals of around 15-20 crores in fiscal 2023 and fiscal 2024 which is sufficient to cover its repayment obligations. Further, the promoters have infused funds in fiscal 2021 to the tune of around Rs 2.4 crores and is expected to infuse around Rs 7 crores in the current fiscal. Additionally, the liquidity profile is supported by promoters' need-based fund support in the form of unsecured loans. BWR believes the liquidity profile is adequate to meet its upcoming repayment obligation and working capital requirements in the medium term.
ABOUT THE ENTITYMangalam Alloy limited (MAL) is the flagship company of Unison Metal Limited(UCM) group which was established in 1988, and subsequently registered as a public company in 1995 but not listed. MAL produces Stainless Steel (SS) Ingots in the form of straight length bright and black round bars, Bright Bars, Hexagonal & Square bars, Angle Bars, Flat Bars, Fasteners, and Forging. Products of the company have a usage in diversified sectors such as Oil and Gas, Pump Sector, Engineering Sector. The company business model is primarily B2B.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 271.26 | 345.91 |
EBITDA | Rs.Crs. | 11.76 | 27.53 |
PAT | Rs.Crs. | -6.54 | 6.54 |
Tangible Net Worth | Rs.Crs. | 63.87 | 67.94 |
Total Debt/Tangible Net Worth | Times | 2.65 | 2.22 |
Current Ratio | Times | 1.25 | 1.15 |
Facilities | Current Rating (2022) | 2021 | 2020 | 2019 | |||||
---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 144.33 |
BWR BBB/Stable
(Reaffirmation) |
NA |
NA
|
25Nov2020 |
BWR BBBStable
(Reaffirmed) |
20Aug2019 |
BWR BBBStable
(Reaffirmed) |
Non Fund Based | ST | 16.63 |
BWR A3+
(Reaffirmation) |
NA |
NA
|
25Nov2020 |
BWR A3+
(Reaffirmed) |
20Aug2019 |
BWR A3+
(Reaffirmed) |
Grand Total | 160.96 | (Rupees One Hundred Sixty Crores and Ninety Six 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 | |
---|---|
Avinash Nagesh Poojari Ratings Analyst avinash.np@brickworkratings.com |
Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@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 | Deutsche Bank | Term LoanSanctioned | 18.64 | _ | 18.64 | |
2 | Deutsche Bank | Pre ShipmentSanctioned | 10.00 | _ | 10.00 | |
3 | Nutan Nagarik Sahakari Bank | Term LoanSanctioned | 7.32 | _ | 7.32 | |
4 | Nutan Nagarik Sahakari Bank | Term LoanSanctioned | 2.00 | _ | 2.00 | |
5 | Punjab National Bank | Cash CreditSanctioned | 30.00 | _ | 30.00 | |
6 | Punjab National Bank | GECLSanctioned | 5.90 | _ | 5.90 | |
7 | Punjab National Bank | Covid -19 Emergency Line CreditSanctioned | 2.20 | _ | 2.20 | |
8 | SIDBI | GECLSanctioned | 4.43 | _ | 4.43 | |
9 | SIDBI | Term LoanSanctioned | 14.25 | _ | 14.25 | |
10 | State Bank Of India (SBI) | Bank GuaranteeSanctioned | _ | 4.00 | 4.00 | |
11 | State Bank Of India (SBI) | Letter of CreditSanctioned | _ | 9.00 | 9.00 | |
12 | State Bank Of India (SBI) | Credit Exposure Limit (CEL)Sanctioned | _ | 3.63 | 3.63 | |
13 | State Bank Of India (SBI) | Covid -19 Emergency Line CreditSanctioned | 3.09 | _ | 3.09 | |
14 | State Bank Of India (SBI) | Working Capital Term LoanSanctioned | 8.50 | _ | 8.50 | |
15 | State Bank Of India (SBI) | Cash CreditSanctioned | 38.00 | _ | 38.00 | |
Total | 144.33 | 16.63 | 160.96 | |||
TOTAL (Rupees One Hundred Sixty Crores and Ninety Six lakhs Only) |
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