AR Ispat

Brickwork Ratings reaffirms the long term ratings with the revision in the outlook on the long-term rating from Stable to Positive at BWR BB+/ Positive for the Bank Loan Facilities of Rs. 31.97 Crs. of AR Ispat

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (30 Sep 2021)	Present
Fund Based	32.01	31.97	Long Term	BWR BB+ /Stable Upgrade	BWR BB + /Positive Reaffirmation
Grand Total	32.01	31.97	(Rupees Thirty One 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

This rating pertains to an existing assignment received prior to 6 October 2022.

Brickwork Ratings reaffirm the long term ratings at BWR BB+ /Positive ,(BWR) revises the outlook from Stable to Positive and reaffirms the ratings of bank loan facilities of Rs. 31.97 crs .of AR ISPAT. The revision in the outlook on the long-term rating from Stable to Positive considers the improvement in TNW Analyzed, Operating Income, PAT, experienced management increase in Scale of Operations and Financial Risk. which is expected to continue to improve over the near to medium term. However, the company had constraints largely due to the Company's Track Record and cyclical nature of industry and High Gearing Ratios. The rating outlook may be revised to 'Stable ' or Negative if the revenues go down and profit margins show lower than expected figures.

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

KEY RATING DRIVERS

Credit Strengths:

Management Experience :
The Company was incorporated in 2018. It is currently managed by Mr. Rakesh Agarwal and Mr. Anand Bansal, who partners in the firm along with AR iron and Ispat Pvt. Ltd. The company has strong support from management as they bring along a cumulative 2 decades of experience in the related field. The company is in existence for 3 years and has seen a complete business cycles. The company has extensive experience of promoters along with healthy relationship with customer and supplier which it has built over the years.
Scale of Operations :
Topline of the company has increased to Rs. 367.25crs in FY22 vs to Rs. 229.52crs in FY21 and projected to increase further to Rs. 516.68 in FY23 & Rs. 539.43 in FY24,YTD sale is Rs. 113.78crs which appear to be achievable in view of trend of sale for best 3 years. OPM has increased to 2.25% in FY22 Vs 2.07% in FY21 and is projected to remain the same to 2.24% in FY23 and 2.10% in FY24. NPM has increased to 1.11% in FY22 vs 1.10% in FY21. Projected to 1.12% in FY23 and 1.12% in FY24.
Financial Risk :

The TNW has increased to Rs. 18.25 crs in FY22 vs Rs. 12.89 crs in FY21 and projected to increase to Rs.21.67crs in FY23 & Rs.25.08crs in FY24. DSCR is at 2.18x in FY22 vs 1.47x in FY21 and projected to 1.79x in FY23 & 1.59x in FY24. ISCR is decreased but at moderate level to 3.68x in FY22 vs 3.92x in FY21 and projected to decrease to 2.98x in FY23 & 3.04x in FY24..Current ratio is almost same to 2.28x in FY22 vs 2.27x in FY21 and projected to decrease to 1.67x in FY23 & 1.73x in FY24.

Credit Risks:

Track Record and cyclical nature of industry : :
Short operational track record of the firm, since commercial operations commenced in June 2019. At the same time the company is exposed to the cyclicality inherent to the steel industry, which limits the pricing flexibility of the industry participants. Highly competitive and fragmented nature of the industry.
High Gearing Ratios :
TOL/TNW has increased to 1.58x in FY22 vs 1.42 in FY21. The company has projected to 1.71x in FY23 & 1.36x in FY24. Total Debt/TNW has increased to 1.48x in FY22 vs 1.33x in FY21. Projected to increase to 1.55x in FY23 and 1.21x in FY24

ANALYTICAL APPROACH - Standalone

BWR has factored in the standalone business parameters and financial risk profile of the company to arrive at the rating. Reference may be made to the Rating Criteria hyperlinked detailed below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Going forward, the ability of the entity to accelerate its scale of operations, increase its profit margins, compliance of bank's sanction terms, efficiently manage its working capital and cash flows for timely servicing of interest/debt obligations and strengthening of overall financial risk profile shall be the key rating sensitivities over short to medium term.

Positive: The rating outlook may be revised to positive or rating may be upgraded if the company is able to sustain its growth and profit margins. Any additional infusion of share’s capital would help to improve its capital structure of the entity.

Negative: The rating outlook may be revised to negative or rating may be downgraded if the entity achieves lower revenue and profit margins than projected

LIQUIDITY INDICATORS - Adequate

Cash Credit utilisation for last 6 months is 42.96%.
Cash and bank balances stood at Rs. 0.15 Crs as on 31 March 2022
Current ratio is at 2.28x in FY22 & is projected to 1.67x in FY23 and 1.73x in FY24.
DSCR has increased to 2.18x in FY22 vs 1.47x in FY21 and projected to 1.79x in FY23 and 1.59x in FY24.
ISCR has decreased to 3.68x in FY22 vs 3.92x in FY21 and projected to decrease to 2.98x in FY23 & 3.04x in FY24.
Net Cash Accruals of Rs. 6.23 Crs in FY22 is sufficient to cover CPLTD of Rs. 5.61Crs . Future Net Cash accruals for FY 23 , FY 24 are expected to meet the debt obligations for the corresponding years.

ABOUT THE ENTITY

Incorporated in 2018 and based in Raigarh (Chhattisgarh), AR Ispat is partnership firm managed by Mr. Rakesh kumar Agarwal, and Mr. Anand Bansal. Firm is into manufacturing of Ms Billets, and has a capacity of 30000 mtpa. The commercial production of the company has started from 15th June 2019.

AR Ispat Manufacture High-Quality Replacement chilled Rolls for Roller Mill and Flaking Mill .They cast iron roll used in Feed mill, Flour, steel industries and Industrial Applications and all this could only happen with the help of their management and employees hard work, dedication and the tremendous effort to achieve our common goal i.e. strive to provide the best solution to our clients

The company has approvals for establishing 5 units of Induction Furnace of total production capacity of 1,80,00 mtpa of MS Billets and Rolling Mill with capacity of production of 1,70,000 mtpa of TMT Bars/Angel/Channel/MS Pipe/Patti/Square Bar). However out of these, only 3 Induction Furnace with capacity of 1,08,000 mtpa are operational. Remaining units of Induction Furnace and Rolling Mill are in expansion pipeline.

The company supplies MS-Billets to Jindal Steel & Power Ltd., JSW (Monnet) Ispat Special Products Ltd, Nalwa Steel & Power, Jay Jagannath Steel & Power Ltd., Ind Synergy Ltd., etc. The customers are located in Raigarh, Raipur, Bhilai, Durg in Chattisgarh, Kanpur, Unnao, Chunar, Jhansi in Uttar Pradesh. Bhiwadi in Rajasthan,Nagpur in Maharastra, Gwalior in Madhya Pradesh, Rourkela in Odisha, Vishakhapatnam in Andhra Pradesh etc.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	367.25	229.52
EBITDA	Rs.Crs.	8.28	4.75
PAT	Rs.Crs.	4.08	2.53
Tangible Net Worth	Rs.Crs.	18.25	12.89
Total Debt/TNW	Times	1.48	1.33
Current Ratio	Times	2.28	2.27

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	31.97	BWR BB+/Positive (Reaffirmation)	30Sep2021	BWR BB+ Stable (Upgrade)	19May2020	BWR BB Stable (Upgradation )	03Apr2019	BWR BB- Stable (Assigned )
Grand Total		31.97	(Rupees Thirty One 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
Akansha R. Mudgil Ratings Analyst akansha.rm@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

AR Ispat

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	Punjab National Bank	Term Loan - Sanctioned	4.61	_	4.61
2	Punjab National Bank	Term Loan - Sanctioned	4.44	_	4.44
3	Punjab National Bank	Cash Credit - Sanctioned	20.00	_	20.00
4	Punjab National Bank	GECL - Sanctioned	0.92	_	0.92
5	Punjab National Bank	GECL - Sanctioned	2.00	_	2.00
Total			31.97	0.00	31.97
TOTAL (Rupees Thirty One Crores and Ninety Seven lakhs Only)

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