Prompt Enterprises Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 412.97 Crs. of Prompt Enterprises Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (08 Jun 2021)	Present
Fund Based	287.34	395.97	Long Term	BWR BBB+ /Negative to Stable Reaffirmation and change in Outlook	BWR BBB + /Stable Reaffirmation
Non Fund Based	5.00	17.00	Short Term	BWR A3+ Reaffirmation	BWR A3 + Reaffirmation
Grand Total	292.34	412.97	(Rupees Four Hundred Twelve Crores and Ninety Seven 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 (BWR) has reaffirmed the ratings assigned to the bank facilities of Prompt Enterprises Private Limited (PEPL, or the company) at BWR BBB+/Stable/A3+. The ratings derive strength from the extensive experience of the promoters in the industry, healthy scale-up of operations and satisfactory profitability margins. The ratings further derive strength from the improvement in the operating cycle and established relationships with the customers and suppliers. The ratings are, however, constrained by the weak capital structure of the company and exposure to the cyclicality and intense competition associated with the industry.

Outlook: Stable

BWR believes that the business and financial risk profile of PEPL will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. The outlook may be revised to 'Positive' in case revenue and profitability show a sustained improvement leading to an improved financial and liquidity profile. The rating outlook may be revised to 'Negative' in case the profitability generated is much lower than anticipated, there are further aggressive debt-funded capex plans, or there is a significant deterioration in the overall liquidity profile of the company.

KEY RATING DRIVERS

Credit Strengths:

Extensive experience of the promoters and long association with its suppliers :
The company commenced its operations in 2003. Its promoters have over 20 years of experience in this sector. It has been able to improve its market penetration in the Delhi-NCR region and has a network of over 300 customers in this region. Furthermore, a long relationship with its suppliers such as Tata, SAIL, etc. has ensured a steady supply of raw material at competitive rates. The said suppliers accounted for over 90% of its total raw material requirements.
Healthy scale up of operations and satisfactory profitability margins :
In FY21(A), the company reported an operating income of Rs. 914.72 cr (y-o-y growth of ~57%) with PBILDT and PAT margins of 8.71% and 2.76%, respectively (compared to 9.14% and 1.15%, respectively). The scale-up of operations has been on the back of availability of new capacities of CR coils, increase in market demand and better sales realization. This along with favorable raw material prices and cost savings from the captive CR coils manufacturing facilities led to healthy profitability margins. The interest service coverage ratio (ISCR) of the company remained healthy and stood at 3.21x, in FY21 (PY: 2.24x). In 9MFY22 (Prov.), the company reported an operating income of Rs. 1140.66 cr with EBITDA and PAT margins of 6.93% and 2.60%, respectively. The ISCR stood at 4.15x in 9MFY22 (Prov.).
Improvement in its working capital cycle :
The Gross Current Assets of the company improved from 137 days to 96 days in FY21(A) mainly due to the reduction in debtor days from 97 days to 58 days. Inventory levels remain consistent as compared to its previous year levels despite the increase in its scale of operations.

Credit Risks:

Weak capital structure :
Due to regular debt funded capacity expansions projects undertaken by the company, the overall gearing continues to remain weak at 2.40x as on March 31, 2021. The same, however, improved from 2.68x, as on March 31, 2020. Currently also, the company is carrying out a debt funded capex of Rs.167.54 Cr., to be funded through a term debt of 85 Cr., equity infusion of Rs. 5.5 cr while remaining will be funded from the internal accruals. PEPL is setting up a Cold Rolling Mill and Pickling Lines and adding new capacities of Continuous Galvanizing Line (CGL) and Colour Coating Line (CCL) at its existing plant. While the CR coil/Pickling line is expected to achieve commercial operations by June 2022, the CGL and CCL lines are expected to commence operations by Oct 2022 and Jan 2023, respectively. On account of this debt funded capex, the capital structure of the company is expected to deteriorate further in the near term.
Exposure to cyclicality and intense competition in the industry :
PEPL is exposed to price risks, given the inherent cyclicality in the industry. This sector is dominated by many unorganized players catering to the local demand. These players mainly cater to the regional demand to save the high transit costs, as demand is highly sensitive to the change in prices. Due to cyclicality in the product prices and the resultant intense competition, margins may remain under pressure. PEPL is exposed to price risks, given the inherent cyclicality in the industry. This sector is dominated by many unorganized players catering to the local demand. These players mainly cater to the regional demand to save the high transit costs, as demand is highly sensitive to the change in prices. Due to cyclicality in the product prices and the resultant intense competition, margins may remain under pressure.

ANALYTICAL APPROACH - Standalone

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 Factors: The ratings may be upgraded if the company is able to successfully complete its proposed capex within the proposed cost and time estimates, stabilize the increased capacities and scale up its operations as proposed while maintaining the profitability margins and is able to significantly and sustainably improve its capital structure and liquidity profile on the back of healthy cash accrual generation.

Negative Factors: Any further weakening of the capital structure due to increased reliance on external debt or major decline in profitability margins would be negative factors for the rating. Further, major elongation in the collection cycle resulting in deterioration in the company’s liquidity position would also be the negative factors.

LIQUIDITY INDICATORS - Adequate

The company reported a substantial increase in its net cash accrual levels in FY21. The net cash accrual stood at Rs. 45.35 Cr. as against term debt obligations of Rs. 16.30 Cr. during the year. For FY22 and FY23, the company has term debt repayment obligations of Rs. 24.92 cr. and Rs.33.01 cr., respectively, which are expected to be met through the internal accruals. The bank limit utilization remained high at around 96% during the past twelve months ending Feb-2022. The company has incurred debt-funded capex on a consistent basis, which has resulted in incremental working capital requirements. The current ratio remains low at 1.14x, as on March 31, 2021 (PY: 1.06x), while the free cash and bank balance stood at Rs.0.12cr., as on March 31, 2021

ABOUT THE ENTITY

Prompt Enterprises Pvt. Ltd (PEPL) was established in December 2003 based in Faridabad, Haryana. It is engaged in the manufacturing of ERW (Electric Resistance Welded) steel tubes and also manufactures C.R. Coils. It manufactures ERW steel tubes of sizes ranging from 0.35mm to 3.20mm in all three plants. It currently operates through three manufacturing facilities - Faridabad unit (ERW Pipes & Slitting Line), Gadhpuri unit (ERW Pipes & Slitting Line), and Dhatir Unit (ERW Pipes, pickling HR Coil and new rolling mill to manufacture C.R. Coils). The total installed capacity of all the units stood at 95,000 MTPA for ERW Pipes, 250,000 MTPA for Slitting Line, 200,000 MTPA for Pickling Line, and 240,000 MTPA for C.R. Coils.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	914.72	580.05
EBITDA	Rs.Crs.	79.68	53.01
PAT	Rs.Crs.	25.26	6.67
Tangible Net Worth	Rs.Crs.	115.49	91.63
Total Debt/Tangible Net Worth	Times	2.40	2.68
Current Ratio	Times	1.14	1.06

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	395.97	BWR BBB+/Stable (Reaffirmation)	08Jun2021	BWR BBB+ Negative to Stable (Reaffirmation and change in Outlook)	20Mar2020	BWR BBB+ Stable to Negative (Reaffirmation and change in Outlook)	01Feb2019	BWR BBB+ Stable (Reaffirmation)
Fund Based	ST	0.00	NA	NA	NA	20Mar2020	BWR BBB+ Negative (Assignment)	NA	NA
Non Fund Based	ST	17.00	BWR A3+ (Reaffirmation)	08Jun2021	BWR A3+ (Reaffirmation)	20Mar2020	BWR A3+ (Reaffirmation)	01Feb2019	BWR A3+ (Reaffirmation)
Grand Total		412.97	(Rupees Four Hundred Twelve Crores and Ninety Seven 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
Kanwalpreet Singh Ratings Analyst kanwalpreet.s@brickworkratings.com	Sudeep Sanwal Associate Director - Ratings sudeep.s@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Prompt Enterprises 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	Axis Bank Ltd.	Term Loan - Sanctioned	25.00	_	25.00
2	Axis Bank Ltd.	Cash Credit - Sanctioned	15.00	_	15.00
3	Axis Bank Ltd.	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	6.80	_	6.80
4	Bajaj Finance Limited	Corporate Loan - Sanctioned	_	_	0.00
5	Bajaj Finance Limited	Term Loan - Sanctioned	25.00	_	25.00
6	Bajaj Finance Limited	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	_	_	0.00
7	Bajaj Finance Limited	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	1.89	_	1.89
8	HDFC Bank	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	8.60	_	8.60
9	HDFC Bank	Cash Credit - Sanctioned	23.00	_	23.00
10	HDFC Bank	Working Capital Demand Loan - Sanctioned	_	_	0.00
11	HDFC Bank	Term Loan - Sanctioned	_	_	0.00
12	HDFC Bank	Term Loan - Sanctioned	4.04	_	4.04
13	HDFC Bank	Term Loan - Sanctioned	4.19	_	4.19
14	HDFC Bank	Term Loan - Sanctioned	45.00	_	45.00
15	ICICI Bank	Term Loan - Sanctioned	4.58	_	4.58
16	ICICI Bank	Term Loan - Sanctioned	4.19	_	4.19
17	ICICI Bank	Working Capital Demand Loan - Sanctioned	_	_	0.00
18	ICICI Bank	Cash Credit - Sanctioned	17.00	_	17.00
19	ICICI Bank	Bank Guarantee	_	2.00	2.00
20	ICICI Bank	ILC/FLC - Sanctioned	_	5.00	5.00
21	Indian Bank	Covid -19 Emergency Line Credit - Sanctioned	0.80	_	0.80
22	Indian Bank	Cash Credit - Sanctioned	20.00	_	20.00
23	Indian Bank	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	1.99	_	1.99
24	IndusInd Bank	Cash Credit - Sanctioned	20.00	_	20.00
25	IndusInd Bank	Term Loan - Sanctioned	14.86	_	14.86
26	Others	Term Loan - Sanctioned	_	_	0.00
27	Siemens Financial Services Private Limited	Term Loan - Sanctioned	4.83	_	4.83
28	Siemens Financial Services Private Limited	Term Loan - Sanctioned	0.18	_	0.18
29	Siemens Financial Services Private Limited	Term Loan - Sanctioned	0.16	_	0.16
30	Standard Chartered Bank	Loans against Property - Sanctioned	0.88	_	0.88
31	State Bank Of India (SBI)	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	14.98	_	14.98
32	State Bank Of India (SBI)	Channel Finance Facility - Sanctioned	60.00	_	60.00
33	State Bank Of India (SBI)	Working Capital Demand Loan - Sanctioned	_	_	0.00
34	State Bank Of India (SBI)	Cash Credit - Sanctioned	50.00	_	50.00
35	Yes Bank	Cash Credit - Sanctioned	20.00	_	20.00
36	Yes Bank	Channel Finance Facility - Sanctioned	3.00	_	3.00
37	Yes Bank	ILC/FLC - Sanctioned	_	10.00	10.00
Total			395.97	17.00	412.97
TOTAL (Rupees Four Hundred Twelve Crores and Ninety Seven lakhs Only)

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