Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 55.86 Crs. of Asiatic Colour Chem Industries Pvt. Ltd.(erstwhile Asiatic Colour Chem Industries Ltd.)
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (19 Nov 2020) |
Present | ||
| Fund Based | 37.00 | 37.86 | Long Term |
BWR BBB- /Stable
Upgrade |
BWR BBB -
/Stable Reaffirmation |
| (15.00) | (15.00) | ||||
| Non Fund Based | 23.00 | 18.00 | Short Term |
BWR A3
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BWR A3
Reaffirmation |
| (22.00) | (17.00) | ||||
| (1.00) | (1.00) | ||||
| Grand Total | 60.00 | 55.86 | (Rupees Fifty Five Crores and Eighty Six lakhs Only) | ||
BWR has considered the standalone financials of the Company and essentially relied upon the audited financial statements upto FY21, management certified latest provisional financials of FY22, projected financial upto FY23 and publicly available information and clarifications provided by the entity’s management.
The rating reaffirmation continues to reflect the extensive experience of ACCIPL's promoters in the dye industry, established customer relationship, sustained growth in revenue in current fiscal and comfortable net worth. The ratings, however, continue to be constrained on account of industry risk related to adherence to the strict pollution control norms, presence in the cyclical chemical industry and susceptibility of its profitability to volatile raw material prices and foreign exchange fluctuation risk.
BWR believes that the business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term.
KEY RATING DRIVERSCredit Strengths:
ACCIPL has an established track record since 1995 in the dyes business catering to leather and fabric industries. The Company is promoted and managed by Mr. Mahesh Agarwal, who has an extensive experience of three decades in the said line of activity. The company will benefit from its experienced management which will help to create long-standing relations with customers and suppliers.
The company’s majority portion of operating income is generated from direct and merchant exports catering to the leather industry. It produces high quality dyes which has resulted in consistent demand from its existing export customers. Direct and merchant exports sharply declined from 83% (of total operating revenue) in FY21 to 68% of revenue in FY21 mainly due to prolonged lockdown, restrictions and global slowdown post coronavirus outbreak. The company witnessed a revenue of Rs. 148.35 Crs in FY21 as compared to Rs. 204.96 Crs in FY20. Nonetheless, with efficient vaccination and relaxation in restriction, the scale of operation improved during the current fiscal FY22. As per the management certified provisional financials of Rs. 191.58 Crs as on 31st January, 2022. Large portion of its export sales are to countries like Turkey, Spain, Italy and other European countries and .
ACCIPL has moderate financial risk profile reflected in comfortable net worth of Rs. 53.68 Crs, low gearing of 0.75x and TOL/TNW of Rs. 1.52x, as on 31st March, 2021. However, thin profit margins, has led to moderate debt protection metrics marked by interest coverage of 1.37x and debt service coverage of 1.36x in FY21. Going forward, the financial risk profile is expected to remain comfortable in absence of long term debt in the medium term.
The chemical industry is exposed to volatility in raw material prices. Additionally 50-60% of the raw material requirement is imported which is however offset by export earnings to cover the exchange fluctuation. The operating profit margin slightly improved from 3.60% in FY20 to 4.10% in FY21 and net profit margin from 0.42% to 0.55%. Further, the company carries industry risk related to adherence to the strict pollution control norms and faces strong competition from large European players, who are well established and dominate the market.
The dye manufacturing business is working capital intensive marked by its extended receivable period from 96 to 153 days in the last two fiscals. To meet its large working capital requirement the company resorts to working capital borrowings coupled with elongated creditors. BWR expects that efficient working capital management will remain a key rating sensitivity.
BWR has considered standalone audited financials of the company and applied its rating methodology as detailed in the Rating Criteria.
RATING SENSITIVITIES
Positive :
Growth in scale of operations with increased profit margins on a sustained basis.
Financial support by promoters in case of working capital requirement, and timely receipt of debtors
Negative:
Decline in profitability margins marked by operating margin, thereby leading to significant moderation in its debt coverage indicators.
Elongated conversion cycle and stressed working capital cycle.
LIQUIDITY INDICATORS - Adequate
The net cash accruals are decrease at Rs. 1.84 Crs and Rs 1.37 Crs in the last two fiscals FY20 & FY21 respectively, however with absence of any repayments, partially supports liquidity. The working capital cycle is stretched owing to elongated receivable cycle. Average cash credit bank lines at 60-65% levels in past 6 months ended on 31st January, 2022. Current ratio is comfortable at 1.71x as on 31st March 2021. Additionally, liquidity is supported by GECL facility and unsecured loans of promoters of Rs. 3.46 Crs
ABOUT THE ENTITYIncorporated in the year 1995, ACCIL is a closely-held public limited company. The company is promoted and managed by Mr. Mahesh Agarwal & his son Mr Vibhor Agarwal. ACCIL is engaged in manufacturing and exports of dyes and pigments which are primarily used in the leather and fabric industry. The Company’s manufacturing unit is located at Ahmedabad with 100% export orientation.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 148.35 | 204.96 |
| EBITDA | Rs.Crs. | 6.08 | 7.37 |
| PAT | Rs.Crs. | 0.81 | 0.85 |
| Tangible Net Worth | Rs.Crs. | 53.68 | 52.87 |
| Total Debt/Tangible Net Worth | Times | 0.75 | 0.79 |
| Current Ratio | Times | 1.71 | 1.56 |
Not Applicable
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 | 37.86 |
BWR BBB-/Stable
(Reaffirmation) |
NA |
NA
|
25Sep2020 |
BWR BB+ Stable
(Downgrade/ISSUER NOT COOPERATING*) |
19Jul2019 |
BWR BBB- Stable
(Reaffirmation) |
| 0.00 |
NA
|
NA |
NA
|
19Nov2020 |
BWR BBB- Stable
(Upgrade) |
NA |
NA
|
||
| FB SubLimit | LT | (15.00) |
BWR BBB-/Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| Non Fund Based | ST | 18.00 |
BWR A3
(Reaffirmation) |
NA |
NA
|
25Sep2020 |
BWR A4+
(Downgrade/ISSUER NOT COOPERATING*) |
19Jul2019 |
BWR A3
(Reaffirmation) |
| 0.00 |
NA
|
NA |
NA
|
19Nov2020 |
BWR A3
(Upgrade) |
NA |
NA
|
||
| NFB SubLimit | ST | (17.00) |
BWR A3
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| (1.00) |
BWR A3
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| Grand Total | 55.86 | (Rupees Fifty Five Crores and Eighty 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 Criteria| Analytical Contacts | |
|---|---|
|
Kunjal Dabhi Rating Analyst Board : +91 79 66174046 / 47 kunjal.r@brickworkratings.com |
Dileep Narayan Singh Director dileep.s@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 | State Bank Of India (SBI) | Stand by Line of CreditSanctioned | _ | _ | 0.00 | |
| 2 | State Bank Of India (SBI) | Letter of CreditSanctioned | _ | 17.00 | 17.00 | |
| Sub-Limit (Bank Guarantee) Sanctioned | (1.00) | |||||
| Sub-Limit (SBLC sublimit for availing buyers credit) Sanctioned | (17.00) | |||||
| 3 | State Bank Of India (SBI) | Credit Exposure Limit (CEL)Sanctioned | _ | 1.00 | 1.00 | |
| 4 | State Bank Of India (SBI) | GECLSanctioned | 4.86 | _ | 4.86 | |
| 5 | State Bank Of India (SBI) | EPC/PCFC/BDSanctioned | 33.00 | _ | 33.00 | |
| Sub-Limit (CC/WCDL) Sanctioned | (15.00) | |||||
| Total | 37.86 | 18.00 | 55.86 | |||
| TOTAL (Rupees Fifty Five Crores and Eighty Six lakhs Only) | ||||||
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