Ajay Ingot Rolling Mill Pvt. Ltd.

Brickwork Ratings reaffirms the long term ratings to BWR BBB-/Stable for the Bank Loan Facilities of Rs. 28.74 Crs. of Ajay Ingot Rolling Mill Pvt. Ltd.

BWR has reaffirmed the long term rating at BWR BBB-  (Stable) for bank loan facilities of Rs 28.74 crs .BWR believes that Ajay Ingot Rolling Mill Pvt Ltd. 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, debt protection metrics and profit show sustained and substantial  improvements. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.

BWR has principally relied upon the standalone audited financial results upto FY21 and FY22(provisional) estimated/projected financials for FY23 to FY24 and publicly available information/ clarifications provided by the bankers and the company’s management.

The reaffirmation of ratings continues to factor into the established track record, experienced promoters, Scale of operation profile, Moderate financial risk and Strategic Location. However, the company had constraints largely due to the Intense competition and inherent cyclicality in the steel industry, Presence in highly competitive & fragmented steel trading industry and clients missed the NPM figure of 3.68% as provisional FY21 with the big margin.

Credit Strengths:

• Experienced promoters coupled with established track record of operations : :

  Ajay Ingot Rolling Mill Pvt Ltd (AIRMPL) was established in 2004 manufacturing of MS Billets and TMT Bars. The company is promoted by Mr. Sanjay Kumar Agarwal & Mr. Vishnu Prasad Jindal. Both the promoters have more than a decade of experience in the iron and steel industry, and look after the day-to-day operations of the company.

• Scale of operation profile : :

  Gross sale of the company has increased to Rs. 340.25 crs in FY22(provisional) vs to Rs.315.94 crs in FY21 and the company has projected Gross sale to Rs. 357.25 in FY23 & Rs. 375.00 in FY24. YTD sale till August is Rs. 147.17crs in a view of the past 3 years trend, YTD sale during the current year, The client will easily cover estimated the projection. The client has proposed a capex plan of Rs. 15crs to 16crs which will be completed FY23  the resources for the same will be mobilized from internal accruals. The impact of the capex will be visible in FY24. Which appears to be achievable in view of trend of sale for best 3 years. OPM has increased to 5.63% in FY22(provisional) vs 3.35% in FY21. The company has projected to 5.58% in FY23 & 5.66% in FY24. Reworked the NPM is   3.52% in FY22(provisional) which shows an increase over  1.42% in FY21. However, clients missed the NPM figure of 3.68% as provisional FY21 with the big margin. The NPM is projected to increase 3.55% in FY23 & 3.75% in FY24.

   

• Moderate financial risk :

  The Adjusted  TNW has increased to Rs. 33.68 crs in FY22(prov) vs Rs. 21.64 crs in FY21 and projected to Rs. 46.27crs in FY23 & Rs. 59.95 crs in FY24. Adjusted TOL/TNW is at a moderate level of 1.30x in FY22(provisional) vs 1.85 in FY21. ISCR is at an adequate level of 7.59x in FY22(provisional) vs 4.74x in FY21 and projected to increase at 9.35x in FY23 & 11.39x in FY24. Adjusted DSCR is at moderate level at 2.32x in FY22(provisional) vs 2.44x in FY21 and projected to 7.35x in FY23 & 2.52x in FY24. Current Ratio has increased  to 1.56x in FY22(provisional) vs 1.41x in FY21. and projected to increase to 1.58x in FY23 and 2.30x in FY24. 
   

• Strategic Location : :

  AIRMPL is strategically located in Raigarh, which is an important steel cluster. As a result, several suppliers are nearby resulting in raw materials being easily available, hence resulting in reduced transportation costs. Additionally, they are provided with subsidized electricity which saves them 25% on electricity costs. Since electricity forms a major part of operating expenses, this results in significant savings on operating expenses on a yearly basis. These factors have resulted in better operating profit margins for the company.

• Intense competition and inherent cyclicality in the steel industry : :
  Company is engaged in the manufacturing of TMT bars and ingots, the industry of which is characterized by high fragmentation mainly due to presence of a large number of unorganized players. The company markets its products in Central India, which is a hub of steel plants, on account of proximity to the mineral rich states of Chhattisgarh. Low level of product differentiation further intensifies the competition, leading to lower bargaining power vis-a-vis the customers. The moderate scale of operations continue to limit AIRMPL’s ability to benefit from economies of scale available to players with larger volumes. The company is exposed to intense competitive pressures from large number of organised and unorganised players along with its exposure to inherent cyclical nature of the steel industry. Demand for the products is linked to Capex programs of end-users such as the real estate sector, civil construction, and engineering industries; which are cyclical. Operating margins are vulnerable to fluctuations in input prices. The prices and supply of the main raw materials viz. steel ingots/billets and coal, directly impacts the realizations of finished goods and any sharp variation in input prices with the absence of almost similar variation in realizations is likely to dent profitability significantly.

• Presence in highly competitive & fragmented steel trading industry: :

  GISTCL belongs to a highly competitive & fragmented steel trading industry with a number of small-sized & mid-sized players engaged in the trading of various steel products. This is evidently reflected in the low profit margins and high collection period.

BWR has factored into a standalone business and financial risk profile of the Company along with the business Ajay Ingot Rolling Mill Pvt Ltd (AIRMPL) to arrive at the rating as they are engaged in a similar line of business. Reference may be made to the Rating Criteria hyperlinked below.

Going forward the ability of the Company to sustainably scale up its operations, improve the overall financial risk profile of the company backed by profitability margins, gearing levels, coverage indicators,  service debt repayment timely and efficiently manage its working capital would be key rating sensitivities.

Positive: Significant and sustained increase in the scale of operations & profit along with an improvement in the overall credit metrics marked by improved leverage and coverage ratios and better liquidity management will be positive for the ratings.

Negative: The rating will be downgraded in case of a significant downturn in the industry leading to a decline in operational/financial performance of the Company, Significant decline in profitability & higher working capital, weakening the capital structure or debt protection metrics and/or increase in debt levels resulting from any unanticipated capex.

• Cash and bank balances stood at Rs. 1.05 Crs as on 31 March 2022(provisional).
• Current ratio moderately increase to 1.56x in FY22(provisional) vs 1.41x in FY21 and projected to 1.58x in FY23 and 2.30x in FY24
• Debt protection metrics are moderate driven by DSCR and ISCR of 3.79x and 7,59x in FY22(Provisional), indicating the internal accruals are adequate to service its debt obligations.
• Net cash accruals of Rs. 14.72crs in FY22(provisional) is sufficient to cover CPLTD of Rs. 11.27crs in FY22 and Expceted net cash accurals will be 16.58crs vs debt obligation of 5.68crs in FY23
• Average Cash Credit utilization stood at 84.09% for last  months

Ajay Ingot Rolling Mill Private Limited (“AIRMPL” or the “Company”) was incorporated on July, 2004 as a Private Limited Company at Raigarh, Chhattisgarh India. The Company is promoted by Mr. Sanjay Kumar Agarwal and Mr. Vishnu Jindal, based out of Raigarh, Chhattisgarh. Since its inception, the company has been engaged in manufacturing of Thermo Mechanically Treated (TMT) bars with installed capacity of 59904 MTPA.The Company is considering a planned capex in order to upgrade its furnace by installing parallel rolling mill with latest technology furnaces to the existing plant.

N/A

CRISIL B+/Stable; ISSUER NOT COOPERATING* as on 13th July 2021

CARE BB-; Stable; ISSUER NOT COOPERATING* as on 13th September 2022

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