Alok Glass Works

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.7.08 Crs. of Alok Glass Works

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned	05.50	Long Term	BWR B + (Positive)
Sub Total	05.50
Non-Fund Based
Letter of Credit - Sanctioned	01.58	Short Term	BWR A4
Sub Total	01.58
Grand Total	07.08	(Rupees Seven Crores and Eight lakhs Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Positive

BWR believes that Alok Glass Works 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

Strengths

• Locational Advantage :

  The firm is located in Firozabad cluster and thus has a competitive advantage in terms of skilled labor, logistics, production knowledge and vendors making the company more efficient and cost effective. The firm has a furnace of 45 metric tonnes drawing capacity per day and 4 machines of press glassware to produce glassware, tumbler, bowl etc. The firm is spread across an area of 20,000 sqm. 

• Established Track Record :

  The company is in existence for 32 years and has seen complete business cycles. The firm is a partnership firm having two partners named Mr. Mohit Mohan Agarwal and Mrs Sarika Agarwal who have huge experience in the line of business the firm is carrying on i.e. manufacturing of all kinds of glasses and glassware, tableware, kitchenware, labware, glass chimney and all kinds of other glassware. 

• Customer Concentration :

  The company has well diversified customers, since top 3 customers contribute only 12 % of sales. The firm also exports to Nepal.

• Debt Protection Metrics :

  DSCR and ISCR of the company stand at 2.24x and 2.06x respectively in FY18 indicating company’s adequacy to meet its debt obligations. Current ratio stands at 1.40x.

Weakness

• Competition in the Industry :

  Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability.

• Risk of Partnership Constitution of the firm:

  Constitution of the firm being a partnership, it is exposed to the risk of withdrawal of capital in case of personal exigencies which may affect the business operations.It is observed there has been withdrawal of capital in FY18.

• Competition in the Industry :

  Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability.

• Low Net worth :

  Net worth of the company is low resulting in high gearing (Total debt/TNW) of 4.46x where a company is mainly dependent on borrowed funds and excessive debt can lead to financial difficulties.

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

Current Ratio stands at 1.40x in FY18. Cash and cash equivalents stand at Rs.11 lakhs in FY18 out of which bank balance consists of Rs.8.87 lakhs and cash in hand of Rs.2.38 lakhs. The company has generated cash surplus of Rs.2.15 crs in FY18.  CC utilisation as on  31.03.2019 was approx 95% however as on 31.08.2019, utilisation levels were 20%. 

The above scenario indicates liquidity less than moderate levels. Also looking at the CC utilisation levels in FY19, there seems to be stress in regards to this. 

PROFILE

Alok Glass, a partnership firm, is engaged in manufacturing and sale of glass bangles, glass wares, glass beads, chimney, scientific goods and other articles and goods made of glass. The firm was established in 1992 and has a registered office in Firozabad, Uttar Pradesh. The manufacturing unit of the firm is equipped with a furnace of 45 metric tonne drawing capacity per day and four machines of press glassware to produce glassware, bowl, tumbler and other press glassware of all types. The firm is run by partners Mr. Mohit Agarwal and Mrs.Sarika Agarwal. The firm is a member of AIGMF (All India Glass Manufacturer's Federation) and UPSIDC (Uttar Pradesh State Industrial Development Authority).The firm uses major raw materials like soda ash, silica sand, broken glass, borax, nature gas and other chemicals. The contracts and raw materials are procured through purchase in open market. The firm is also having quality certification like ISO 9001:2008.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 17-18	FY 16-17
Operating Revenue	Rs.Crs.	27.69	32.49
EBITDA	Rs.Crs.	1.56	2.40
PAT	Rs.Crs.	1.45	0.98
Tangible Net Worth	Rs.Crs.	2.45	4.13
Total Debt/Tangible Net Worth	Times	4.46	1.83
Current Ratio	Times	1.40	1.39

NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2019)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2018	2017	2016
Fund Based
1	Cash Credit - Sanctioned	Long Term	5.50	BWR B+ (Pronounced as BWR Single B plus) (Outlook: Positive)	NA	NA	NA
Non-Fund Based
2	Letter of Credit - Sanctioned	Short Term	1.58	BWR A4 (Pronounced as BWR A Four )	NA	NA	NA
Total			07.08	(Rupees Seven Crores and Eight lakhs 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
• Short Term Debt

For More Information Contact:

Analytical Contacts	Investor Contacts
Shweta Tandon Rating Analyst B : +91 11 2341 2232 Ext : 111 shweta.t@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
Satvinder Kumar Gakhar Associate Director - Ratings B : +91 11 2341 2232 satvinder.g@brickworkratings.com
1-860-425-2742

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Cash Credit - Sanctioned	5.50	_	5.50
2	Letter of Credit - Sanctioned	_	1.58	1.58
Total				7.08
TOTAL (Rupees Seven Crores and Eight lakhs Only)