Brickwork Ratings reaffirms and simultaneously withdraws the ratings for the Bank Loan Facilities of Rs.164.76Crs. of A-One Steel and Alloys Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (10 May 2021) |
Present | ||
| Fund Based | 142.40 | 134.26 | Long Term |
BWR BBB+ /Stable
Upgrade |
BWR BBB +
/Stable Reaffirmation/Withdrawal |
| Non Fund Based | 30.50 | 30.50 | Short Term |
BWR A2
Upgrade |
BWR A2
Reaffirmation/Withdrawal |
| Grand Total | 172.90 | 164.76 | (Rupees One Hundred Sixty Four Crores and Seventy Six lakhs Only) | ||
Brickwork Ratings (BWR) has reaffirmed the long-term rating to BWR BBB+ (Stable) and short term ratings to BWR A2 for the bank loan facilities of A-One Steel and Alloys Pvt Ltd and simultaneously withdrawn it with immediate effect. The withdrawal of ratings is based on company's request for withdrawal of ratings via mail dated 09th May, 2022 and on receipt of no objection certificates from its banker. The withdrawal is in-line with BWR's policy on withdrawal of bank loan ratings.
Reaffirmation of ratings while withdrawing factors in the significant improvement in business and financial risk profile in FY21 and FY22 (Provisional), company's experienced promoters, diversified product portfolio along with a wide distribution network spread across multiple states. However, these strengths are partially offset by the working capital intensive nature of operations, susceptibility to cyclicality and fluctuation in raw material prices and inherent risk of the industry along with intense competition.
The outlook remains Stable backed by positive demand and margin outlook for the steel industry.
Credit Strength :
The financial risk profile of the company has improved over the previous year as depicted by Debt coverage indicators viz, the interest service coverage ratio (ISCR) and debt service coverage ratio (DSCR), improved to 5.97x and 2.58x, respectively, in FY21 from 2.65x and 1.72x, respectively, in FY20. The same has further improved to 7.25x and 3.82x respectively in FY22 (provisional). Total Net Worth of the company has improved to Rs.115.37crs in FY21 from Rs.48.47crs in FY20 due to infusion of equity by the promoters of the company. The total operating income (TOI) improved by ~20.25% to Rs.1,486.14crs in FY21 from Rs.1235.84crs in FY20. The company has further reported growth of ~58.22% in its Total Operating Income to Rs.2351.40crore with EBIDTA and PAT margins remained moderate at 5.47% and 3.16% respectively in FY22 (provisional).
Established track record of operations and experienced management :
The company commenced its operations in 2013 and has a successful track record of more than eight years in the existing line of business. ASAPL’s long track record and the extensive experience of promoters have helped establish relations with various stakeholders for its business. The company was established and is managed by the Jalan family, holding 100% equity stake in ASAPL as of March 31, 2021. Furthermore, the promoters are assisted by a team of experienced professionals in managing the company’s daily business operations.
The company manufactures & sells Mild steel (MS) billets and Thermo mechanically treated (TMT) bars, MS Pipes. The products manufactured by the company find end use in infrastructure & real estate industries. The company sells their products Pipes & TMT under the brand name of “A One Gold”. The company has a strong network of 700 registered dealers & distribution. The company sells its products in Karnataka ,Tamil Nadu, Andhra Pradesh, Hyderabad, Dubai, Singapore & UK.
Credit Risks:
The profitability is vulnerable to fluctuations in the prices of raw materials as the latter constitutes ~94% of the company’s operating expenses in FY21 and FY22 (provisional). 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 etc. 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.
Working capital Intensive nature of business :
The operations of ASAPL remained working capital intensive, supported largely by the bank borrowings. The Cash Credit limit of the company has enhanced from Rs.85cr to Rs.135cr in the month of Oct 2021.The average utilization of fund based working capital limits of the company stood high around 90% during the last 12 months ending 30th April 2022 as per Banker feedback.
The steel industry is highly fragmented with the presence of both organized and unorganized players in the downstream segment providing similar products/services. Hence, the company faces competition from regional players leading to intense competition and pricing pressures, which in turn affect the profitability margins of the company.
A-One Steel and Alloys Pvt Ltd (ASAPL) was incorporated in April 2012 by Mr. Sunil Kumar Jalan and Mr. Sandeep Kumar Jalan in Bangalore. It commenced commercial operations in June 2013. It is engaged in the manufacturing of Mild steel (MS) billets and Thermo mechanically treated (TMT) bars, MS Pipes. It is also involved in trading of Coal & Scap sale. It has two manufacturing facilities one at Gauribidanur, Karnataka with an installed capacity of 96,000 metric tonnes per annum (MTPA) to manufacture TMT bars and capacity of 1,99,000 MTPA to manufacture MS billets. The other manufacturing unit is located in Bellary, Karnataka with an installed capacity of 1,20,000 MTPA to manufacture MS Pipes. The trading of Coal & scrap sale is done in Bellary, Karnataka. The company sells their products Pipes & TMT under the brand name of “A One Gold”. It has its own captive power generation plant of 22 MW. It is an ISO certified company. It has one 100% owned subsidiary ,Vanya Steels Pvt Ltd which is engaged in manufacturing of sponge iron.
STATUS OF NON-COOPERATION WITH PREVIOUS CRANA
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 | 134.26 |
BWR BBB+/Stable
(Reaffirmation/Withdrawal) |
10May2021 |
BWR BBB+ Stable
(Upgrade) |
02Jun2020 |
BWR BBBStable
(Assignment) |
NA |
NA
|
| Non Fund Based | ST | 30.50 |
BWR A2
(Reaffirmation/Withdrawal) |
10May2021 |
BWR A2
(Upgrade) |
02Jun2020 |
BWR A3+
(Assignment) |
NA |
NA
|
| Grand Total | 164.76 | (Rupees One Hundred Sixty Four Crores and Seventy Six 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.
| Analytical Contacts | |
|---|---|
|
Akanksha Senior Ratings Analyst akanksha@brickworkratings.com |
Tanu Sharma Director - Ratings tanusharma@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 | HDFC Bank | Term LoanSanctioned | 25.45 | _ | 25.45 | |
| 2 | HDFC Bank | Cash CreditSanctioned | 85.00 | _ | 85.00 | |
| 3 | HDFC Bank | Bank GuaranteeSanctioned | _ | 0.50 | 0.50 | |
| 4 | HDFC Bank | Inland Letter of Credit (ILC)Sanctioned | _ | 27.00 | 27.00 | |
| 5 | HDFC Bank | Forward ContractSanctioned | _ | 3.00 | 3.00 | |
| 6 | HDFC Bank | GECLSanctioned | 23.81 | _ | 23.81 | |
| Total | 134.26 | 30.50 | 164.76 | |||
| TOTAL (Rupees One Hundred Sixty Four Crores and Seventy Six lakhs Only) | ||||||
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