Anand Transformers Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.33.00 Crs. of Anand Transformers Pvt. Ltd.

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned Overdraft against Book Debts (ODBD) - Sanctioned Over Draft - Proposed	01.00 07.00 01.00	Long Term	BWR BB (Stable)
Sub Total	09.00
Non-Fund Based
Letter of Credit - Sanctioned Bank Guarantee - Sanctioned Letter of Credit - Proposed Bank Guarantee - Proposed	01.00 13.00 01.00 09.00	Short Term	BWR A4 +
Sub Total	24.00
Grand Total	33.00	(Rupees Thirty Three Crores Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I
Note: The current exposure of the bank stands at INR 22.00 crores but in view of the healthy work orders in hand, INR 11.00 crores more of bank facilities are proposed. RATING ACTION / OUTLOOK : Stable

Brickwork Ratings has assigned long term and short term ratings of BWR BB, Stable /BWR A4+ to the bank loans of INR 33.00 crores of Anand Transformers Pvt Ltd. The ratings assigned are based on the established operational track record coupled with extensive experience of the promoters, healthy work order size position, good profitability margins, and comfortable financial risk profile. However, the ratings are constrained by modest and declining scale of operations, working capital intensive nature of operations, and intense competition in the industry.

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. Brickwork Ratings believes that Anand Transformers Pvt Ltd will continue to benefit from its long existence and extensive experience of the promoters.

KEY RATING DRIVERS

Credit Strengths:

• Established operational track record coupled with extensive experience of the promoters :

  The company has an established operational track record of almost three decades in the power distribution and transmission equipments industry. Moreover, the promoters of the company carry experience of over two to four decades in the industry which has helped the company to establish a healthy relationship with state-run power distribution companies.

• Healthy work order size position :

  The company has a healthy work order book position of INR 110.20 crores as on 31 Dec 2019 of which it has already executed INR 19.73 crores worth of orders. By looking at the size of orders it can be said that the company has revenue visibility in the short to medium term.

• Good profitability margins :

  The profitability margins of the company have increased and also are at a good level marked by OPM and NPM of 8.61% and 3.50% respectively in FY 2019 as against 6.62% and 3.08% respectively in FY 2018. It is estimated that the margins may improve in the medium term.

• Comfortable financial risk profile :

  The company has a comfortable financial risk profile as the gearing is low at 0.72x in FY 2019 and above-average interest coverage metric of 2.02x in FY 2019. The financial risk profile may remain comfortable in the medium term.

Credit Risks:

• Modest  and declining scale of operations :

  Despite being in the business for almost three decades, the company’s scale of operations marked by total operating revenue of INR 23.53 crores in FY 2019 is modest as well as declining. The modest scale of operations constrains the financial and operational flexibility and limits economies of scale.

• Working capital intensive nature of operations :

  The nature of operations of the company is working capital intensive driven by the tender-based business regime which results in high receivables at 300 days in FY 2019 as compared with 216 days in FY 2018. Although the conversion cycle at 232 days in FY 2019 is supported by payables at 127 days.he risk arising out of the working capital intensive nature of operations is offset as 60% of the revenue from the sale of transformers is realized within 90 days and the rest 40% from the erection of the transformer and handover of the project gets realized in 8-10 months so the receivable days technically goes beyond 300 days.

• Intense competition in the industry :

  The industry is characterized by many small and mid-size transformer manufacturers producing outputs of similar technical specifications. This restricts the pricing power of the incumbents. To acquire more market share they often compete based on margins. This places pressure on the profitability of the industry. Also, they have to compete with big and established players in terms of both scale and technology. The Company needs to increase its scale of operations, keep up with the technological upgradations, enter into appropriate technological collaboration agreements and enhance its brand value to overcome the competition.

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 company to complete the projects in hand without any cost and time overruns, improve its scale of operations, maintain the good profitability margins, maintain the comfortable level of the financial risk profile and efficient utilization of its working capital requirements will be the key rating sensitivities.

Positive: Diversification of customer base, substantial increase in revenue from operations, an increase in profitability, and improvement in the overall financial risk profile.

Negative: Any steep decline in revenue from operations and deteoriation in profitability margins, liquidity, and overall financial risk profile.

LIQUIDITY POSITION

The liquidity profile of the company is adequate marked by moderate cash and cash equivalents of INR 2.26 crores in FY 2019 and 42% utilization of the cash credit and overdraft facility. Further, the current ratio and the quick ratio of 1.41x and 1.28x respectively in FY 2019 signify adequate liquidity position.

PROFILE

Incorporated in 1998, Anand Transformers is a Faizabad-based private limited company engaged in the manufacturing and distribution and power transformers. The company also undertakes contracts from various state-run power distribution companies to install the transformers. The current promoters of the company are Mr. Sriniwas Agarwal, Mr. Bharat Agarwal, and Mr. Deepak Agarwal who are mechanical, computer, and electrical engineer respectively by qualification and also carry extensive experince of over two to four decades in the industry.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	23.53	31.80
EBITDA	Rs.Crs.	2.03	2.11
PAT	Rs.Crs.	0.82	0.98
Tangible Net Worth	Rs.Crs.	8.06	7.23
Total Debt/Tangible Net Worth	Times	0.72	1.43
Current Ratio	Times	1.41	1.28

NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2020)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2019	2018	2017
Fund Based
1	Cash Credit - Sanctioned Overdraft against Book Debts (ODBD) - Sanctioned Over Draft - Proposed	Long Term	01.00 07.00 01.00	BWR BB (Stable)	NA	NA	NA
Non-Fund Based
2	Letter of Credit - Sanctioned Bank Guarantee - Sanctioned Letter of Credit - Proposed Bank Guarantee - Proposed	Short Term	01.00 13.00 01.00 09.00	BWR A4+	NA	NA	NA
Total			33.00	(Rupees Thirty Three 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
• Infrastructure Sector
• Short Term Debt

For More Information Contact:

Analytical Contacts	Investor Contacts
Akshay Rastogi Ratings Analyst B : +91 11 2341 2232 akshay.r@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	1.00	_	1.00
2	Overdraft against Book Debts (ODBD) - Sanctioned	7.00	_	7.00
3	Over Draft - Proposed	1.00	_	1.00
4	Letter of Credit - Sanctioned	_	1.00	1.00
5	Bank Guarantee - Sanctioned	_	13.00	13.00
6	Letter of Credit - Proposed	_	1.00	1.00
7	Bank Guarantee - Proposed	_	9.00	9.00
Total				33.00
TOTAL (Rupees Thirty Three Crores Only)

Note: The current exposure of the bank stands at INR 22.00 crores but in view of the healthy work orders in hand, INR 11.00 crores more of bank facilities are proposed.