Axayya Alloys Pvt. Ltd.

Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 41.82 Crs. of Axayya Alloys Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (22 Mar 2021)	Present
Fund Based	9.80	16.82	Long Term	BWR BB+ /Stable Assignment	BWR BBB - /Stable Upgrade
	(3.00)	(0.00)	Short Term	BWR A4+ Assignment	_
	(2.00)	(0.00)
	(2.00)	(0.00)
Non Fund Based	25.00	25.00	Short Term	BWR A4+ Assignment	BWR A3 Upgrade
Non Fund Based	(25.00)	(15.00)	Short Term	BWR A4+ Assignment	BWR A3 Upgrade
Grand Total	34.80	41.82	(Rupees Forty One Crores and Eighty Two 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

BWR has upgraded the ratings of Axayya Alloys Pvt. Ltd. to BWR BBB- (Stable)/BWR A3. BWR believes that the firm's business risk profile will 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' in case the revenues and profit show sustained improvement backed by a favorable industry scenario. The rating outlook may be revised to 'Negative' if the revenues and profit margins show lower than expected figures.

BWR has essentially relied upon the audited financial statements of Axayya Alloys Pvt. Lt.'s for FY20, and FY21, and projection of FY22, FY23 and FY24 and publicly available information and information/clarifications provided by the entity’s management.

The rating draws strength from the experienced promoters, moderate scale of operations and achieveability of sales, moderate financial risk profile, reputed clientele base, and enhanced and increased capacity. The rating is constrained by the intense competition in the industry, customer concentration risk, and supplier concentration risk.

Going forward the ability of the company to maintain its overall financial risk profile would be its key rating sensitivity.

KEY RATING DRIVERS

Credit Strengths:

Experienced Promoters :
The promoter of the company possess an expeirence of over four decades in the industry. The company has been in existence for four decades and has established strong relations with the customers and suppliers, supporting the business risk profile and enabling repeated orders.
Moderate scale of operations and achieveability of sales :
The company has achieved TOI of Rs. 121.13 Crs. in FY21 v/s Rs. 62.73 Crs. in FY20. The substantial increase in the TOI is because the company earlier had the capacity of manufacturing 700 MTPA per month which has now increased to 2000 MTPA per month. The same is projected to increase to Rs. 216.00 Crs. and the projected figure is achievable on the basis of sales achieved by the Company amounting to Rs. 181.59 Crs. for the period April 2021 to January 2022. The Company also has an running order book.
Moderate financial risk profile :
TNW has increased to Rs. 18.83 Crs. in FY21 v/s Rs. 17.18 Crs. in FY20 on account of ploughing back of profits in the business. The same is projected to further increase to Rs. 25.92 Crs. in FY22. TNW (Analyzed) has increased to Rs. 28.78 Crs. in FY21 and TNW (Adjusted) is standing at Rs. 18.53 Crs. in FY21. The gearing of the company has improved with TD/TNW 1.89x in FY21 v/s 1.91x in FY20. TD/TNW (Analyzed) is standing at 0.89x in FY21, whereas TOL/TNW of the company is standing at 2.47x in FY21 v/s 1.88x in FY20. The gearing is projected to further improve to 1.41x in FY22. The profit margins remains at a moderate level with OPM and NPM standing at 6.58% and 1.59% respectively in FY21 v/s 9.02% and 0.43% respectively in FY20. The OPM is projected to remain at a moderate level of 6.40%, whereas NPM is projected to increase to 3.06% in FY22. The liquidity profile of the company has declined with current ratio standing at 1.13x in FY21 v/s 1.25x in FY20. The same is projecetd to improve further to 1.48x in FY22. The debt protection metrics of the company has improved with ISCR and DSCR standing at 1.92x and 1.58x respectively in FY21 v/s 1.35x and 1.19x respectively in FY20. The debt protection metrics is projected to improved further to 3.85x and 2.94x respectively in FY22.
Reputed clientele base :
The company have a good clientele base which includes companies like Tata Motors Limited, Mahindra and Mahindra, Volkswagen, Jay Hind Industries Group, Vanaz Industries, Gaberial, Advin Hi-tech, Srimram Piston & Ring etc.
Enhanced and increased capacity :
The company earlier had the capactity of 700 MTPA per month. In October 2020, the capactity was enhanced and added 600 MTPA per month and in November 2021 additional 700 MTPA per month were added. As of date the total capacity of the company is 2000 MTPA per month.

Credit Risks:

Intense Competition in the Industry :
The aluminium industry is highly fragmented with the presence of both organized and unorganized players in the downstream segment providing similar products/services. Hence, the company faces competition from regional players leading to intense competition and pricing pressures, which in turn affect the profitability margins of the company.
Customer concentration risk :
Top 5 customers of the company contribute to 68.10% (approx.) of the total sales made by the company.
Supplier concentration risk :
Top 5 suppliers of the company contribute to 63.14% (approx.) of the total purchases made by the company.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale)

RATING SENSITIVITIES

The ability of the company to successfully scale up its operations, while maintaining a comfortable financial risk profile and adequate liquidity would be its key rating sensitivities.

Positive: The rating may be upgraded if the scale of operations, profitability and overall financial risk profile of the company shows significant improvement.

Negative: The rating may be downgraded if there is a significant deterioration in the scale of operations and financial risk profile affecting the debt servicing capacity of the company.

LIQUIDITY INDICATORS - Adequate

The company has an adequate liquidity profile. The company has a modest current ratio of 1.13x in FY21 and the same is projected to improve further to 1.48x in FY22. The net cash accruals stand at Rs. 3.64 Crs. in FY21 which is sufficient to cover CPLTD of Rs. 0.40 Crs. As on date the unavailed CC limit stands at Rs. 0.16 Crs. and cash balance stands at Rs.0.01 Crs. The average utilization of the CC Limit stands at 97.63% for 8 months. The company is going to apply for enhancement in the limit shortly considering increase in commodity price as well as for future sales plan.

ABOUT THE ENTITY

Incorporated by Mr. N. N. Kher in 1981, the company was a manufacturer of aluminum, copper, zinc based alloys along with master alloys. In 2008 Mr. Manoharlal Lodha who has a vast experience in trading and recycling of metals took over the company. The company is currently headed by Managing Director, Mr. Pavan Lodha and Executive Director Mitesh Lodha with whom the company has evolved as a supplier of aluminum cast alloys.

Company manufactures a variety of Aluminum alloys for Pressure Die casting & Gravity Die casting industries. Company is in this field from last 33 years serving various industries.

The manufacturing facility is one of the best in class in the country and is fully equipped with an advanced automatic furnace and other machinery. This helps the Company in not only fulfilling bulk orders on time but also create and supply specific or niche alloys. Timeless and customer satisfaction are the main pillars that Axayya Alloys Pvt. Ltd. aspires to deliver on. The Company has dedicated quality professionals that scrutinize every single batch of alloys using the industry standard Spectromaxx Metal Analyzer to ensure that the composition is exactly as per the customer’s requirement.

The company earlier had the capactity of 700 MTPA per month. In October 2020, the capactity was enhanced and added 600 MTPA per month and in November 2021 additional 700 MTPA per month were added. As of date the total capacity of the company is 2000 MTPA per month.

Production Process

Aluminum which is called as Wonder Metal or Millennium Metal is made using scrap as the basic feed stock. Primary smelters use bauxite ore. However secondary melting process is less time consuming, requiring much less investment and size of the plant is flexible.

Axayya Alloys Pvt. Ltd.'s finished product is a raw material for the die Castings industry. The customers of the Company are limited companies like Shriram Pistons, Jaihind Industry, Tata Motors, they make critical components like Pistons, cylinder heads, and wheels. The Company have been also approved by Volkswagen, and Mahindra & Mahindra as their vendor.

Company's furnace is unique in the sense that it is fitted with four porous plugs through which argon gas is pumped into the liquid metal which removes the inclusions, and hydrogen gas entrapment, thus the metal becomes pure. The Company has imported furnace from KMF Austria and holding furnace from Striko Westofen Germany.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	121.13	62.73
EBITDA	Rs.Crs.	7.97	5.66
PAT	Rs.Crs.	1.93	0.27
Tangible Net Worth	Rs.Crs.	18.83	17.18
Total Debt/Tangible Net Worth	Times	1.89	1.91
Current Ratio	Times	1.13	1.25

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	16.82	BWR BBB-/Stable (Upgrade)	22Mar2021	BWR BB+ Stable (Assignment)	NA	NA	NA	NA
FB SubLimit	ST	NA	NA	22Mar2021	BWR A4+ (Assignment)	NA	NA	NA	NA
Non Fund Based	ST	25.00	BWR A3 (Upgrade)	22Mar2021	BWR A4+ (Assignment)	NA	NA	NA	NA
NFB SubLimit	ST	(15.00)	BWR A3 (Upgrade)	22Mar2021	BWR A4+ (Assignment)	NA	NA	NA	NA
Grand Total		41.82	(Rupees Forty One Crores and Eighty Two 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
Mita Ghanshyam Gupta Ratings Analyst mita.g@brickworkratings.com	Sushil Kumar Chitkara Director - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Axayya Alloys 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	1.41	_	1.41
2	Union Bank of India	Cash Credit - Sanctioned	8.00	_	8.00
	Sub-Limit (Bill Discounting) - Sanctioned		(0.00)
	Sub-Limit (FDBP/FUDBP) - Sanctioned		(0.00)
	Sub-Limit (PC/PCFC) - Sanctioned		(0.00)
3	Union Bank of India	Letter of Credit - Sanctioned	_	25.00	25.00
	Sub-Limit (Buyers Credit) - Sanctioned		(15.00)
4	Union Bank of India	GECL - Out-standing	7.41	_	7.41
Total			16.82	25.00	41.82
TOTAL (Rupees Forty One Crores and Eighty Two lakhs Only)

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