A One Steels India Pvt. Ltd.

Brickwork Ratings reaffirms and places the ratings for the Bank Loan Facilities of Rs.28.64 Crs. of A One Steels India Pvt. Ltd on Credit Watch with Developing Implications.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (28 Jun 2021)	Present
Fund Based	23.73	23.64	Long Term	BWR BBB- /Stable Reaffirmation	BWR BBB - /Credit Watch with Developing Implications Reaffirmation and change in Outlook
Non Fund Based	5.00	5.00	Short Term	BWR A3 Reaffirmation	BWR A3 /Credit Watch with Developing Implications Reaffirmation
Grand Total	28.73	28.64	(Rupees Twenty Eight Crores and Sixty Four 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 long- and short- term ratings for the bank facilities of A One Steels India Pvt Ltd (ASIPL, or 'the company') and placed the ratings on 'Credit Watch with Developing Implications.

The ratings of ASIPL have been placed on credit watch with developing implications, following the initiation of procedure of merger of A One Steels India Private Limited (Transferor Company-I), Aaryan Hitech Steels India Private Limited (Transferor Company -II) with A-One Steel and Alloys Private Limited (Transferee Company). The effective date of amalgamation is 1 April, 2021 and the company has received two interim orders from National Company Law Tribunal (NCLT) with the next hearing date on 10 August, 2022. BWR will review the ratings and monitor the developments, on the aforementioned aspects, in light of this merger.

The reaffirmation in the ratings of ASIPL is on account of overall improvement in financial risk profile, experienced promoters with long track record of operations and diversified product portfolio.

The ratings are, however, constrained by working capital intensive nature of operations, susceptibility to cyclicality and fluctuation in raw material prices and highly competitive and cyclical nature of industry.

KEY RATING DRIVERS

Credit Strengths:

Experienced promoters with long track record of operations :
The company commenced its operations in 2008 and has a successful track record of more than a decade in the existing line of business. ASIPL’s long track record and the extensive experience of promoters have helped establish relations with various stakeholders for its business. The main promoter of the company Mr. Krishan Kumar Jallan has an experience of more than two decades in the steel industry. He is being supported by his sons Mr. Sandeep Jallan and Mr Sunil Kumar Jallan who are having experience of more than a decade. The company is managed by the Jalan family, holding 100% equity stake in ASIPL as of March 31, 2022. Furthermore, the promoters are assisted by a team of experienced professionals in managing the company’s daily business operations.
Diversified product portfolio :
The company manufactures and sells Mild Steel (MS) Billets and Structural items like MS channels, MS angles, MS rounds etc, which contributed around 16.39% and 77.56% respectively in total revenue of FY22 (provisional) as against 14.14% and 71.83% respectively in FY21. The products manufactured by the company find end use in infrastructure industries. The company sells their Structural products under the brand name of “ A-One Gold”. The company sells its products in Karnataka & Andhra Pradesh with a strong marketing network of 1000 dealers.
Improvement in overall financial risk profile :
The company has shown improvement in overall financial risk profile in FY22 (provisional) as depicted by growth in total operating income, profitability and other debt coverage indicators. The total operating income of the company has shown significant y-o-y growth of 76.74% to Rs.526.24Crs in FY22 (provisional) as against Rs. 297.75 Crs in FY21 from Rs.267.38 Crs in FY20 on the back of higher sales volume and realizations. The company’s PBILDT and PAT margin in FY22 (provisional) improved and stood at 3.37% and 1.72%, respectively, as against 3.06% and 1.15% in FY21 and 2.44% and 1.29% in FY20. The capital structure of the company remains satisfactory over the years. The overall gearing ratio improved and remained comfortable at 0.60x as on March 31, 2022 (provisional) as against 0.79x as on March 31, 2021 at the back of strengthening of tangible net worth with prolonged profits as well as repayment of scheduled term loans. The debt coverage indicators of the company marked by the interest coverage ratio has improved and stood at 8.68x during FY22 (provisional) against 4.35x during FY21 on account of improved cash accruals, increase in PBILDT levels and company’s ability to pass through fluctuations in raw material prices.

Credit Risks:

Working Capital intensive nature of operations :
The operations of ASIPL remained working capital intensive, supported largely by the bank borrowings. The average utilisation of fund based working capital limits of the company stood moderate around 86% during the last 6 months ending 30 June 2022.The operating cycle of the company remained comfortable and ranges between 40-50 days. The company primarily operates in the domestic market and receives payment from its debtors in 30-45 days. Furthermore, the company must maintain an inventory of around 2 to 3 months to ensure smooth operations for catering to customers demand in a timely manner.
Susceptibility to cyclicality and fluctuation in raw material prices :
The profitability is vulnerable to fluctuations in the prices of raw materials as the latter constitutes ~88% of the company’s operating expenses. Further the performance of the company is linked to the steel industry, with cyclical changes in demand and price volatility. The demand for steel products depends on the growth of primary end user segments such as infrastructure and real estate. Any slowdown may in turn adversely affect the demand for steel products over the medium term. However in order to mitigate the risk of raw material prices volatility it buys raw materials in bulk when prices are low.
Highly competitive and cyclical nature of industry :
The steel industry is highly competitive due to the presence of various organized and unorganized players and limited product diversity due to the commodity nature of products. Although over the years, industry has become more organized with the share of unorganized players reducing, margins continue to be impacted due to fragmentation of the industry. Also, the steel industry is sensitive to shifting business cycles including changes in the general economy, interest rates and seasonal changes in demand and supply conditions in the market.

ANALYTICAL APPROACH - Standalone

BWR has applied its rating methodology on a standalone basis, as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).BWR has principally relied upon the standalone audited financial results of A One Steel India Pvt Ltd upto 31st March 2021, management-certified provisional financials for FY22, projected financials for FY23 and FY24 and publicly available information/ clarifications provided by the company’s management.

RATING SENSITIVITIES

Upward: BWR may revise the ratings upward in the case of a sustained and substantial improvement in the scale of operations, along with sustenance of current credit metrics.

Downward: BWR may revise the rating downward in the case of a significant reduction in the scale of operations, operating margins, and/or deterioration in debt protection metrics.

LIQUIDITY INDICATORS - Adequate

The company has adequate liquidity position as marked by sufficient generation of cash accruals of Rs.12.85cr in FY22 (provisional) against a CPLTD of Rs.0.14Crs. There are only long term secured borrowings from banks amounting to Rs.3.64Crs as on 31st March 2022. The company is expecting sufficient cash accruals of Rs.14.20cr in FY23 against debt obligation of Rs.1.15cr. The average working capital utilization of cash credit limit of Rs.20cr stood moderate at 86.08% for the 6 month period ended June-22. The unencumbered cash and bank balance of the company stood at Rs.13cr as on 31 March,2022.

ABOUT THE ENTITY

ASIPL was incorporated in 2008 by Mr. Sunil Kumar Jalan and Mr. Sandeep Kumar Jalan in Bangalore. It is engaged in the manufacturing of Mild steel (MS) billets and Structural Iems like MS Channels, MS Angles, MS Rounds. It is also involved in trading of Coal & Scap sale. ASIPL has a manufacturing facility at Hindupur, Andhra Pradesh with an installed capacity of 55,000 tonnes per annum (TPA) to manufacture Structural Items and capacity of 66,000 TPA to manufacture MS billets. The Trading of scrap sale is done in Hindupur, Andhra Pradesh. The company sells their structural products under the brand name of “A-One Gold”. It is an ISO certified company and has well supported rapid working systems for all of their Quality controls.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	297.75	267.38
EBITDA	Rs.Crs.	9.12	6.54
PAT	Rs.Crs.	3.42	3.44
Tangible Net Worth	Rs.Crs.	35.17	31.83
Total Debt/TNW	Times	0.79	0.90
Current Ratio	Times	1.38	1.33

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

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	23.64	BWR BBB-/Credit Watch with Developing Implications (Reaffirmation and change in Outlook)	28Jun2021	BWR BBB- Stable (Reaffirmation)	29Jun2020	BWR BBB- Stable (Assignment)	NA	NA
Non Fund Based	ST	5.00	BWR A3/Credit Watch with Developing Implications (Reaffirmation)	28Jun2021	BWR A3 (Reaffirmation)	29Jun2020	BWR A3 (Assignment)	NA	NA
Grand Total		28.64	(Rupees Twenty Eight Crores and Sixty Four 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
Akanksha Senior Ratings Analyst akanksha@brickworkratings.com	Sudeep Sanwal Associate Director - Ratings sudeep.s@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

A One Steels India 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	HDFC Bank	Working Capital Term Loan - Out-standing	3.64	_	3.64
2	HDFC Bank	Cash Credit - Sanctioned	20.00	_	20.00
3	HDFC Bank	Letter of Credit - Sanctioned	_	5.00	5.00
Total			23.64	5.00	28.64
TOTAL (Rupees Twenty Eight Crores and Sixty Four lakhs Only)

Print and Digital Media

The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.

About Brickwork Ratings

Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 12,000 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

Disclaimer

Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.

BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR's best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).

BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.

The ratings assigned by BWR are only an expression of BWR's opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.

BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user's financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.

BWR's ratings reflect BWR's opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.

Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.

BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR's public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR's rating criteria are also generally made available without charge on BWR's website.

This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.

BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.