Aadharshree Paper Mills (P) Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.12.00 Crs. of Aadharshree Paper Mills (P) Ltd.

Particulars

Facilities**	Amount(Rs.Crs)	Tenure	Rating*
Fund Based	12.00	Long Term	BWR B (Pronounced as BWR Single B ) (Outlook: Stable)
Total	12.00	(Rupees Twelve Crores Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I
Note: The facilities are sanctioned, however, not disbursed yet. RATING ACTION / OUTLOOK : Stable

BWR believes the Aadharshree Paper Mills (P) 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 and profit show sustained improvement. The rating outlook may be revisd to 'Negative' if the revenues go down and profit margins show lower than expected figures

KEY RATING DRIVERS

BWR has essentially relied upon the projected financial statements of Aadharshree Paper Mills (P) Ltd. for FY20, FY21, FY22, FY23 and FY24, publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the business experience of the promoters / directors. However, the rating is constrained by exposure to cyclicality in the paper industry, intense industry competition and working capital intensive nature of the business and project execution risk.

Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities

Strengths

• Experience of promoters:

  The company is promoted by Mr. Ashish Kumar Tyagi, Mr. Ankit Tyagi and Mr. Shrey Verma who are also directors of the company. The promoters are well qualified and gained industry experience while working with their fathers in their respective paper manufacturing businesses. Their experience and knowledge will help them in maintaining relationship with their suppliers and customers in the future.

Weakness

• Exposure to cyclicality in the paper industry:

  The price of paper tends to fluctuate sharply, affecting the profitability of paper manufacturers. Demand for paper is also linked to the level of economic activity. Hence, cyclical downturns or adverse change in the demand-supply balance may result in lower realisations.

• Intense industry competition, characterised by the presence of large number of organised and unorganised players:

  The paper industry is highly competitive and fragmented in nature because of the presence of established players having a good brand recognition along with numerous small players.

• Working capital intensive nature of operations:

  The conversion cycle of the company is high at 295 days in FY20 as a result of high inventory days i.e 172 days and high receivable days i.e. 152 days. Since it is the first year of company's business operations, the conversion cycle is high. However, in the following year the conversion cycle got reduced to 64 days and thereafter increased to 73 days in FY22, which is also on the higher side and indicates working capital intensive nature of the business.

• Project execution risk:

  The company is projecting to start the commercial operations 01Dec2019. However, till Jul 2019 the project is only 25% completed. Thus, project execution risk exist.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

For ariving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).

LIQUIDITY POSITION

The liquid assets of the company are projected at Rs. 0.50 cr. in FY20. The net cash accrual are projected to be Rs. 0.50 cr. in FY20, the repayment of the term loan will start from Apr 2020. The current ratio of the firm is moderate at 1.85 times in FY20 projections. The debt protection metrics is above average with an ISCR of 2.86 times and DSCR of 2.58 times in FY20 projections. The conversion cycle of the company is high at 295 days in FY20 as a result of high inventory days i.e. 172 days and high receivable days i.e. 152 days. Conversion cycle is high in FY20 since it is first year of company's business operations, in the following year the conversion cycle got reduced to 64 days. 

The company don't have any associate concern.

Considering the above, the liquidity position of the company is moderate.

PROFILE

Aadharshree Paper Mills Private Limited (APMPL), was incorporated in Aug 2018 as a private limited company and registered with Registrar of Companies, Uttarakhand. The location of the project is Manglore, Dist. Haridwar. The company is promoted by Mr. Ashish Kumar Tyagi, Mr. Ankit Tyagi and Mr. Shrey Verma. The company proposes to install M.G. Poster paper and Craft paper manufacturing unit in the state of Uttarakhand with annual installed capacity of 23100 MT. The company proposes to use waste paper as the main raw material, which is easily available in open market. The commercial operations of the company will start from 01Dec2019.

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2019)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2018	2017	2016
1	Fund Based	Long Term	12.00	BWR B (Pronounced as BWR Single B ) (Outlook: Stable)	NA	NA	NA
Total			12.00	(Rupees Twelve Crores Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS

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 :

• General Criteria
• Approach to Financial Ratios
• Manufacturing Companies

For More Information Contact:

Analytical Contacts	Investor Contacts
Navnica Mishra Lead Analyst navnica.m@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
V.K.Kukreja Associate Director - Ratings B : +91 11 2341 2232 kukreja.vk@brickworkratings.com
1-860-425-2742

SL.No.	Name of the Bank	Long Term(Rs.Crs)		Short Term(Rs.Crs)	Total(Rs.Crs)
		CC	TL
1	PNB	3	9		12
	TOTAL (Rupees Twelve Crores Only)	3	9	0	12

Note: The facilities are sanctioned, however, not disbursed yet.