RATING RATIONALE
23 Dec 2021
Arham Alloy & Steel Pvt. Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.11.00 Crs. of Arham Alloy & Steel Pvt. Ltd.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
|
Term Loan
Out-standing
Cash Credit Sanctioned |
03.00
08.00 |
Long Term | BWR BB - (Stable) |
| Sub Total | 11.00 | ||
| Grand Total | 11.00 | (Rupees Eleven Crores Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR has assigned the rating of Arham Alloy and Steel Private Limited to BWR BB- (Stable) deriving its strength from the extensive experience of the management, moderate scale of operations and moderate profit margin levels. However the rating is constrained by the average financial risk profile marked by average debt coverage indicators and higher gearing and presence in intensely competitive industry.
BWR believes that Arham Alloy & Steel Pvt. 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 revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.
Credit Strengths:
-
Extensive experience of the promoters :
The management of the company includes three directors namely, Mr. Abhay Jain, Mr. Atul Jain and Mr. Amit Jain with their extensive experience and knowledge of the industry, they are able to maintain long term relationships with their clients and suppliers and give an edge to the company over other players in the industry.
-
Moderate Scale of Operations :
The total operating income of the company has improved and stood moderate to Rs. 139.41 Cr in FY21 (Prov) from Rs. 95.17 Cr in FY20 on account of increase in trading of metal scrap during the year. Till 30th Nov 2021 , the company has achieved the total revenue of Rs. 152.00 Cr and already surpass the projected revenue of FY22 (Proj).
-
Moderate Profitability Margins
:
The company’s profitability margins have also slightly improved as evident from the Operating profit Margins and Net Profit Margins of 3.74 % and 1.04% respectively in FY-21(Prov) as against 3.63 % and 0.66 % respectively in FY20.
-
Average financial risk profile :
The financial risk profile of the company stood average marked by the tangible net worth stood at Rs. 8.08 Cr. in FY21 (Prov) . The capital structure stood leveraged marked by overall gearing of 3.29 times in FY21 (Prov). The debt protection metrics stood average with an ISCR of 1.57 times and DSCR of 0.92 times in FY21 (Prov). The term debt obligations are financed through the unsecured loans taken during the year. The company has a current ratio of 1.34 times and cash conversion cycle of 24 days in FY21 (Prov).
-
Presence in intensely competitive industry :
The company faces intense competition from other players in the industry, which limits its pricing flexibility and bargaining power. Also as the industry is dominated by imported products, it further constraints pricing flexibility.
BWR has factored in the standalone business parameters and financial risk profile of the company to arrive at the rating.
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).
Going forward, the ability of the company to improve its scale of operations, profitability margins, overall credit risk profile and efficiently manage its working capital obligations would be the key rating sensitivities.
Positive : The rating may be upgraded if the company is able to significantly improve its revenue, profitability and financial risk profile marked by gearing and debt coverage indicators.
Negative : The rating may be downgraded if there is a deterioration in financial risk profile including gearing , conversion cycle and debt coverage indicators.
The unencumbered cash and cash equivalents is Rs. 0.08 Cr for FY21 (Prov). The Current ratio of the company is stood comfortable at 1.34 times . The debt protection metrics stood average marked at ISCR at 1.57x and DSCR at 0.92x for FY21(Prov) . The term debt obligation of Long Term debt for FY21(Prov) is Rs. 0.60 Cr and Net Cash accruals (PAT+Dep.) for FY22(Proj) is Rs.1.70 Crs. Average credit utilization for last 6 months as per the banker’s feedback is 80 %.
Therefore, the overall liquidity position is stretched.
Arham Alloy and Steel Private Limited incorporated in 19th Jun 2007 as a Private Limited company by its Directors, Mr. Abhay Jain, Mr. Atul Jain and Mr. Amit Jain. The company is engaged in the trading of Non Ferrous metal scrap material. The registered office is located at Paharganj, New Delhi and state of the art processing house situated at Faridabad, Haryana, where they segregate the material and recycle. They deal in non ferrous scrap like stainless steel scrap, copper, aluminum, Brass, tungsten , tantalum, titanium, Nickel, Nickel alloy, gillette etc. The company imports 70 % scrap and the remaining is domestic procurement. It supplies in the Delhi NCR.
| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 95.17 | 111.68 |
| EBITDA | Rs.Crs. | 3.45 | 3.05 |
| PAT | Rs.Crs. | 0.63 | 0.84 |
| Tangible Net Worth | Rs.Crs. | 5.82 | 5.19 |
| Total Debt/Tangible Net Worth | Times | 3.09 | 2.57 |
| Current Ratio | Times | 1.45 | 1.23 |
NA
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2021) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2020 | 2019 | 2018 | ||||
| Fund Based | ||||||||||
| 1 | Term Loan - Out-standingCash Credit - Sanctioned | Long Term | 03.0008.00 | BWR BB-(Stable) | NA | NA | NA | |||
| Total | 11.00 | (Rupees Eleven Crores Only) | ||||||||
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 | |
|---|---|
|
Nisha Nagar Lead Analyst nisha.n@brickworkratings.com |
Hari Kishan Yadav Associate Director - Ratings hari.ky@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|---|
| 1 | Kotak Mahindra Bank | Term LoanOut-standing | 3.00 | _ | 3.00 |
| 2 | Kotak Mahindra Bank | Cash CreditSanctioned | 8.00 | _ | 8.00 |
| Total | 11.00 | 0.00 | 11.00 | ||
| TOTAL (Rupees Eleven Crores Only) | |||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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