Ashirwad Industries

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.12.25 Crs. of Ashirwad Industries

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned Term Loan - Sanctioned Cash Credit - Proposed	02.50 02.25 05.00	Long Term	BWR B (Stable)
Sub Total	09.75
Non-Fund Based
Bank Guarantee - Sanctioned	02.50	Short Term	BWR A4
Sub Total	02.50
Grand Total	12.25	(Rupees Twelve Crores and Twenty Five 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 : Stable

BWR has assigned a rating of BWR B (Stable)/A4 to Ashirwad Industries on account of extensive experience of the partners, reputed clientele, above-average liquidity profile. The ratings have also taken into consideration the constitution as a partnership firm, stretched gearing, weak debt protection metrics, weak profit margins, susceptibility to volatility in sugar prices and regulatory changes.

The ratings have been assigned a stable outlook on account of the potential growth in demand in the Indian ethanol manufacturing industry in order to meet its demand for Fuel Blending Programme. BWR believes that Ashirwad Industries business risk profile will be maintained over the medium term.

KEY RATING DRIVERS

Credit Strengths:

• Extensive experience :

  Extensive experience of the partners.

• Highly reputed customers :

  Highly reputed customers with AI supplying ethanol to HPCL, BPCL Indian Oil Corporation.

• Above average liquidity profile :

  Above average liquidity profile with the current ratio standing at 1.45x in FY19 as compared to 1.91x in FY18, although declined but adequate.

Credit Risks:

• Constitution as a partnership firm :

  This results in an inherent risk of fluctuation of capital on account of the withdrawal of capital by the partners.

• Stretched gearing :

  The gearing is stretched with the total debt/ TNW and TOL/TNW standing at 2.54x and 3.12x in FY19 respectively as compared to 1.58x and 1.94x respectively in FY18.

• Weak debt protection metrics :

  Weak debt protection metrics with the ISCR and DSCR standing at 1.72x and 1.11x respectively in FY19.

• Weak profit margins :

  Weak profit margins with the NPM and OPM standing at 0.08% and 6.81% respectively in FY19.

• Susceptibility to volatility in sugar prices and regulatory changes :

  While the input prices are driven by the government, sugar prices are volatile and based on open market prices (which are dependent on the production levels) leading to volatility in players' profitability. Besides, the government regulates domestic demand-supply through restrictions on imports and exports, and stock holdings. Regulatory mechanisms and dependence on monsoons have rendered the sugar industry cyclical.

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 firm’s ability to improve the scale of operations, improve and maintain profitability, the debt servicing capability & liquidity will be the key rating sensitivities.

Positive: The rating will be upgraded  if the company is able to achieve significant growth in revenue and profitability backed by a favourable industry scenario and optimum utilisation of capacities, and sustained improvement working capital management.

Negative: The rating may be downgraded if there is lower than expected revenues affecting the profitability margins, coverage ratios, liquidity and gearing ratios adversely.

LIQUIDITY POSITION

The cash and cash equivalents stand at Rs 0.10 Cr in FY19. The company has cash accruals of Rs 0.48 Cr in FY19 as compared to mere long term debt obligations of Rs 0.04 Cr in FY19. The current ratio of the firm stands at 1.45x in FY19. The average utilization of the facility for the last 6 months stands at ~85%.

PROFILE

Ashirwad Industries (AI) is a partnership firm that commenced operations in Apr 2018. It is into manufacturing of ethanol which is used for various applications like blending petrol, diesel, pharmaceutical, textile industry, paint and rubber industries. It is located in Western Maharashtra, about 100 kms from Pune at Khandala. It is operational for 270 days in a year and uses SDS As the raw material which is sourced from other co-operative sugar factories for conversion to ethanol.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	16.78	0.00
EBITDA	Rs.Crs.	1.13	0.00
PAT	Rs.Crs.	0.01	0.00
Tangible Net Worth	Rs.Crs.	1.94	1.65
Total Debt/Tangible Net Worth	Times	2.54	1.58
Current Ratio	Times	1.45	1.91

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 Cash Credit - Proposed	Long Term	2.50 2.25 5.00	BWR B (Stable)	NA	NA	NA
Non-Fund Based
2	Bank Guarantee - Sanctioned	Short Term	2.50	BWR A4	NA	NA	NA
Total			12.25	(Rupees Twelve Crores and Twenty Five 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
• Manufacturing Companies
• Short Term Debt

For More Information Contact:

Analytical Contacts	Investor Contacts
Saloni R Singh Ratings Analyst D : +91 22 6745 6647 B : +91 22 2831 1426, +91 22 2831 1439 saloni.s@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	2.50	_	2.50
2	Term Loan - Sanctioned	2.25	_	2.25
3	Bank Guarantee - Sanctioned	_	2.50	2.50
4	Cash Credit - Proposed	5.00	_	5.00
Total				12.25
TOTAL (Rupees Twelve Crores and Twenty Five lakhs Only)