Agroha Iron And Steel Industries

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.12.00 Crs. of Agroha Iron And Steel Industries

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned Term Loan - Sanctioned	07.00 05.00	Long Term	BWR B + (Stable)
Sub Total	12.00
Grand 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 RATING ACTION / OUTLOOK : Stable

BWR believes that Agroha Iron And Steel Industries 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

Credit Strengths:

• Locational Advantage:

  The company/Firm is located in Rajgarh 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.

• Partner's Experience:

  Experience of the partners in the business over two decades in the Steel industry.

• Project Installation:

  The firm has completed the project installation and started commercial production from October 2019.

• Current Ratio:

  The current ratio is projected at 1.33 x in FY20.

Credit Risks:

• Moderate debt protection metrics:

  Moderate ISCR is projected 1.99x in FY20 and DSCR 1.57x in FY20.

• Initial stage of business:

  Stabilization risk associated with the firm being in the very initial stage of business.

• Low scale of operations and Partner’s capital:

  The firm has a low scale of operations and Partner’s capital.

• Competition from established players and highly Competitive and Commoditized Nature of the Business:

  High level of competition from already established players in the market. The ratings also take into account the highly competitive and commoditized nature of the iron and steel business and volatility in the prices of raw materials and finished goods.

• Partnership Constitution:

  Being a partnership firm is exposed to the inherent risk associated with the capital being withdrawn at a time of personal exigencies and the risk of dissolution.

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).

RATING SENSITIVITIES

Going forward, the ability of the entity to establish its business and 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 firm is able to sustain its growth and profit margins as per the projection in FY20.  Any additional infusion of partner’s capital would help to improve its capital structure of the firm.

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

LIQUIDITY POSITION

The cash and cash equivalents of Agroha Iron And Steel Industries stand at Rs 0.02 Crs in FY19. Long term debt repayment will start from April 2020.

PROFILE

M/S Agroha Iron and steel industries (AIASI) was established in 2018. Mr. Uttam Kumar Agarwal, Gaurav Kumar Agarwal and Pushkar Lal Agarwal are the other partner of the firm. It is engaged in manufacturing of TMT bars. It has started its commercial production from October 2019. The units operate in one shift. It has presently 25 skilled workers and 35 unskilled workers. The unit is located near Pali Village, Raigad, Chattisgarh. It has the locational advantage for inward of raw material and outward dispatch of finished goods. The capacity utilisation will be 30000 metric tonnes.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 20-21	FY 19-20
Operating Revenue	Rs.Crs.	77.87	36.75
EBITDA	Rs.Crs.	4.59	2.00
PAT	Rs.Crs.	1.54	0.36
Tangible Net Worth	Rs.Crs.	7.65	6.10
Total Debt/Tangible Net Worth	Times	1.46	1.97
Current Ratio	Times	1.54	1.33

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 Term Loan - Sanctioned	Long Term	7.00 5.00	BWR B+ (Pronounced as BWR Single B plus) (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.

For More Information Contact:

Analytical Contacts	Investor Contacts
Ushadevi V Dogra Ratings Analyst D : +91 22 6745 6650 B : +91 22 2831 1426, +91 22 2831 1439 ushadevi.d@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
Sushil Kumar Chitkara Associate Director - Ratings B : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@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	7.00	_	7.00
2	Term Loan - Sanctioned	5.00	_	5.00
Total				12.00
TOTAL (Rupees Twelve Crores Only)