Arihant Impex

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.5.00 Crs. of Arihant Impex

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned	05.00	Long Term	BWR B + (Stable)
Sub Total	05.00
Grand Total	05.00	(Rupees Five 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

The long term rating of BWR B+ (Stable) has been assigned for the bank loan facilities of Arihant Impex ( or "the firm"). The rating draws strength from the experienced proprietor, increase in scale of operations . However, the rating is constrained on account of the moderate risk profile, constitution of the firm and high competition from other established players in the market.

BWR believes that the business risk profile of Arihant Impex 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 revised to 'Negative' if there is any deterioration in the financial risk profile of the firm.

KEY RATING DRIVERS

Credit Strengths:

• Experienced Proprietor & Long Operational Track Record :

  The proprietor of the firm, Mr Virender Kumar Bhaeti has around 20 years of experience in this line of business and have long and healthy relations with customers and suppliers which will be helpful in further expansion of operations. Further, the firm has a long operational track record of almost two decades, being established in 2000.

• Increase in scale of operations :

  The firm has doubled its scale of operations by expanding its customer base reaching the markets of Assam, Bengal and Kolkata. The top line of the firm, reflects an increase in revenue from 18.17 cr to 34.35 cr in FY 19.

Credit Risks:

• Moderate Financial Risk Profile :

  There is an increase in debt equity ratio from 7.10x to 8.36x in FY 19 due to low net worth base. There are moderate debt service indicators with Interest Service Coverage ratio (ISCR) of 1.21 x in FY 19. The firm has an operating profit margin of 6.40% and net profit margin of 0.69% in FY 19.

• Risks associated with proprietorship concern :

  Given the proprietorship nature of the Arihant Impex’s constitution, There is an inherent risk of the possibility of withdrawal of proprietor’s capital for any personal contingency that could adversely impact the capital structure of the firm.

• Highly Fragmented & Competitive Industry :

  The textile industry is highly fragmented with a large number of organised and unorganised players in the market. The firm faces stiff competition from other players in the market, affecting its profitability margins.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

For arriving 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 firm to bring stability in operations and improving its financial risk profile will remain the key rating sensitivities.

Positive: The rating may be upgraded if the firm interalia, is able to continue increasing its scale of operations and profitability margins, improve tangible net worth or on account of any other favourable factor. 

Negative: The rating may be downgraded if inter alia, there is reduction in proprietor’s capital, inadequate liquidity, not able to face stiff competition in this industry or on account of any unforeseen unfavourable events.

LIQUIDITY POSITION

Stretched : The firm has liquid investments including Cash & Bank Balances of INR 0.11 cr as on March 31, 2019. Current ratio stood  at 1.23 times as on 31.03.2019. The long term borrowings of 3.87 cr includes mainly unsecured only of 2.82 cr and other personal loans of 1.05 cr as on 31.03.2019. The conversion cycle has been at 44 days in FY 19. The firm has Interest service coverage ratio( ISCR) of 1.21x  in FY 19. Overall liquidity of the company remains stretched with average cash credit limit utilization of around 96% from May'19 to Oct'19 availed from Bank Of Baroda.

Any Related Concerns : The firm has a sister concern, Maheshwari & Firms which is owned by Pushpa Baheti (wife of Virender Kumar Baheti) and from where the firm gets process work done on job work basis .

PROFILE

Established in the year 2000, Arihant Impex is a sole proprietorship firm of Mr Virender Kumar Baheti, having its registered office located at Pali, Rajasthan. The firm is a textile manufacturer involved in manufacturing of printed cloth for types of ladies cotton nighty. The main raw material for the firm is grey cloth which is processed into finished cloth pieces for manufacturing of ladies cotton nighty, involving the process of dyeing, printing , textile finishing , cutting of cloth into pieces and packaging. This processed cloth is sold in cities like Rajasthan, Assam, Kolkata, Bengal. The firm gets this process work done on job work basis by its sister concern, Maheshwari and Sons which is in the name of Pushpa Baheti (wife of Virender Kumar Baheti).

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	34.35	18.17
EBITDA	Rs.Crs.	2.20	1.31
PAT	Rs.Crs.	0.24	0.15
Tangible Net Worth	Rs.Crs.	1.02	1.09
Total Debt/Tangible Net Worth	Times	8.36	7.10
Current Ratio	Times	1.23	1.21

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	5.00	BWR B+ (Stable)	NA	NA	NA
Total			05.00	(Rupees Five 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
Rashi Arora Ratings Analyst B : +91 172 5032 295 / 6 Ext : 104 rashi.a@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.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Cash Credit - Sanctioned	5.00	_	5.00
Total				5.00
TOTAL (Rupees Five Crores Only)