Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 6.91 Crs. of Guru Nanak Forging Pvt. Ltd.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (26 Nov 2021) |
Present | ||
Fund Based | 7.61 | 6.16 | Long Term |
BWR BB/Stable
Reaffirmation/ISSUER NOT COOPERATING* |
BWR BB
/Stable Reaffirmation |
Non Fund Based | 0.75 | 0.75 | Short Term |
BWR A4+
Reaffirmation/ISSUER NOT COOPERATING* |
BWR A4 +
Reaffirmation |
Grand Total | 8.36 | 6.91 | (Rupees Six Crores and Ninety One lakhs Only) |
BWR Reaffirmed the long term bank loan ratings of Guru Nanak Forging Private Limited BWR BB Stable and short term rating of BWR A4+.
The rating draws strength from the extensive experience of promoters in forging industry and moderate financial risk profile, Whereas The rating of the firm is constrained by stagnant scale of revenues, competition in the industry and cyclical nature of business.
BWR believes that the business risk profile of “Guru Nanak Forging Private Limited.” 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 there is significant improvement in revenues, and profit margins of the company. The rating outlook may be revised to “Negative” if there is any deterioration in the financial risk profile including liquidity profile of the company.
KEY RATING DRIVERSCredit Strengths:
The promoters of the company has rich experience of more than 20 years in forging industry that helps them to make better relationship with their customers and suppliers as well. The company's customers are primarily manufacturers of auto components.
The company has moderate scale of operations with revenues of Rs 27.81 crores in FY21 (Audited) and it has further improved to Rs 31.80 crores in FY22. The company has moderate net worth of Rs 11.59 crores in FY21 (Audited) along with Moderate Debt Service Indicators, Interest service Coverage Ratio of 2.99 Times & Debt Service Coverage ratio of 1.55 Times in FY21 (Audited), The company has moderate gearing level with TD/TNW of 1.01 Times & Moderate Operating Profitability Margins with Net Profit Margins of 2.32% & Operating Profit Margins of 11.06% in FY21 (Audited). The company has moderate current ratio of 1.41 Times in FY21 (Audited).
The company revenues remained stagnant from last three years. However company has achieved revenues of Rs 29.07 crores in FY21 (Audited) which is further increased to Rs 33.60 crores in FY22.
Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability.
The company is operating in competitive and fragmented nature of industry specially in primarily steel producing industry. There are several players who are engaged in the steel products/automobile parts manufacturing business in organized and unorganized sector. Moreover, the profit margins and sales of the company remains exposed to inherent cyclicality in the steel industry. Adverse volatility in steel prices will have an adverse effect on company’s performance in view of direct linkage to the fortunes of Steel industry.
For Arriving at the Rating BWR has used Standalone Approach for arriving at its ratings, as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Going forward, the ability of the company to improve its revenues and financial risk profile would remain the key rating sensitivities.
Positive: Rating may be upgraded in case of substantial improvement in revenues and net profit margins of the company.
Negative: Rating may be downgraded in case there is deterioration in financial risk profile of the company including the liquidity of the company.
LIQUIDITY INDICATORS - Adequate
The company has associate concern with the name of Bomrah Industries but there is no operational linkages between them. The company has cash & bank balances of Rs 1.18 crores in FY21 (Audited). The company has average utilisation of 89 % of their cash credit limit in last six months. The company long term borrowings comprises of term loan from Canara Bank of Rs 4.94 crores, Unsecured loans from directors of Rs 1.57 crores, and Unsecured Loans from friends & relatives of Rs 1.61 crores in FY21 (Audited). The company has cash accruals of Rs 2.18 crores against the CPLTD of Rs 1.02 crores in FY21 (Audited) & Rs 3.12 crores against the CPLTD of Rs 1.41 crores in FY22. The company has Interest Service Coverage Ratio of 2.99 Times & Debt Service Coverage Ratio of 1.55 Times in FY21 (Audited). The current ratio has been 1.41 Times in FY21 (Audited). The company has conversion cycle of 72 days in FY21 (Audited).
ABOUT THE ENTITYGuru Nanak Forging Private Limited established in 2003 and engaged in the manufacturing of cold and hot forged high tensile fasteners and components for passenger cars, SUV, light medium and heavy commercial vehicles, tractors, diesel engines etc. The company is equipped with state of the art forging facility spread over 6000 sq ft with in house die maintenance shop, heat treatment and machining capabilities. The company has its manufacturing located at Kurali, Mohali. Punjab and is currently managed by Mr Harjeet Singh and other directors.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 29.07 | 26.04 |
EBITDA | Rs.Crs. | 3.21 | 2.15 |
PAT | Rs.Crs. | 0.68 | 0.21 |
Tangible Net Worth | Rs.Crs. | 11.59 | 10.92 |
Total Debt/Tangible Net Worth | Times | 1.01 | 0.78 |
Current Ratio | Times | 1.41 | 1.31 |
Crisil B Stable/A4 under Issuer Not Cooperating on 28.05.2021.
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 | 6.16 |
BWR BB/Stable
(Reaffirmation) |
26Nov2021 |
BWR BBStable
(Reaffirmation/ISSUER NOT COOPERATING*) |
19Aug2020 |
BWR BBStable
(Reaffirmation) |
12Aug2019 |
BWR BBStable
(Assignment) |
Non Fund Based | ST | 0.75 |
BWR A4+
(Reaffirmation) |
26Nov2021 |
BWR A4+
(Reaffirmation/ISSUER NOT COOPERATING*) |
19Aug2020 |
BWR A4+
(Reaffirmation) |
12Aug2019 |
BWR A4+
(Assignment) |
Grand Total | 6.91 | (Rupees Six Crores and Ninety One 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 | |
---|---|
Aman sharma Rating Analyst Board : +91 172 5032 295 / 6 aman.s@brickworkratings.com |
V.K.Kukreja Associate Director - Ratings Board : +91 11 2341 2232 kukreja.vk@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 | Canara Bank | Term LoanSanctioned | 3.66 | _ | 3.66 | |
2 | Canara Bank | Cash CreditSanctioned | 2.50 | _ | 2.50 | |
3 | Canara Bank | Bank GuaranteeSanctioned | _ | 0.75 | 0.75 | |
Total | 6.16 | 0.75 | 6.91 | |||
TOTAL (Rupees Six Crores and Ninety One lakhs Only) |
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