Ashoka Foam Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.7.15 Crs. of Ashoka Foam Pvt. Ltd.

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned Term Loan - Out-standing Sub-Limit (ODBD) - Sanctioned	05.00 02.15 (02.00)	Long Term	BWR B + (Negative)
Sub-Limit (FLC) - Sanctioned	(02.00)	Short Term	BWR A4
Sub Total	07.15
Grand Total	07.15	(Rupees Seven Crores and Fifteen 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 : Negative

Brickwork Ratings has assigned the long term rating of BWR B+ with negative outlook and short term rating of BWR A4 to bank loans of Ashoka Foam Pvt. Ltd. The ratings take into account extensive experience of promoters, infusion of funds through unsecured loans by promoters. However the rating is constrained by average financial risk profile, small scale of operations, intense competition, vulnerability of profitability to adverse movement in prices of key raw materials, elongated conversion cycle and impact of coronavirus (COVID-19) pandemic.

The Outlook assigned to the entity is "Negative” as entity's business performance is expected to be impacted in the short to medium term because of delays in execution of existing orders and disruption in production due to lockdown imposed to contain the spread of novel coronavirus.

KEY RATING DRIVERS

Credit Strengths:

• Extensive experience of promoters :

  The promoters of the company Mr. Ashok Kumar Goel, Mr. Yogesh Kumar Goel, Mr. Yogendra Goel and Vibhore Goel have been associated with group concerns for more than three decades in various industries like furniture and packaging products. AFPL benefits from the established dealers network of sister concerns.

• Infusion of Unsecured Loans :

  The promoters have been infusing funds by way of unsecured loans to support the company when the need arises. In FY19, Unsecured loans stood at INR 7.04 Crores against INR 6.58 Crores in FY18 which is subordinated to the bank debt. As a result of infusion of unsecured loans, Analyzed TNW stood at INR 12.49 Crores in FY19.

Credit Risks:

• Average Financial Risk Profile :

  Company's profitability margin remained thin over the last 3 years, with net profit margin of 0.87% in FY19. The gearing of the company is high as reflected by Total Debt/TNW of 3.06x in FY19 as against 5.54x in FY18 and TOL/TNW of 2.32x in FY19 as against 4.10x in FY18. Net cash accruals to total debt was low at around 0.04 times in FY19. Debt service metrics is below average, ISCR & DSCR stood at 1.35x & 0.64x in FY19 against 1.29x & 0.66x in FY18.

• Small Scale of Operations and Intense Competition :

  The company’s scale of operations is small with revenues of INR 18.17 Crores in FY19. The furniture manufacturing industry is fragmented and highly competitive which limits pricing flexibility and bargaining power with customers, thereby putting pressure on its revenue and margins.

• Profitability remains vulnerable to adverse movement in prices of key raw materials :

  Raw material cost forms a significant portion of the total manufacturing cost and the main raw material used in manufacturing is poly vinyl chloride (PVC) resin, which is a crude oil derivative. Hence, the price of the same remains volatile in nature depending on crude oil price movements.

• Elongated Conversion Cycle :

  The net cash conversion cycle was 178 days in FY19 (FY18: 161 days), with receivables period of 130 days (FY18: 92 days), inventory period of 104 days (FY18: 102 days) and payable period of 56 days (FY18: 33 days).

• Impact of Coronavirus (COVID-19) pandemic :

  The Company's revenues are expected to be impacted in the short to medium term because of delays in execution of existing orders and disruption in production due to lockdown imposed to contain the spread of novel coronavirus.

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 improve revenue & profitability margins, manage liquidity, infuse capital and timely repayment of debt obligations would be key rating sensitivities.

Positive: The rating may be upgraded in case the revenues, profit margins and liquidity position show sustained improvement.

Negative: The rating may be downgraded if there is a delay in debt servicing, substantial decline in revenues and if there is an overall deterioration in the financial risk profile of the entity.

LIQUIDITY POSITION

Stretched: The average maximum utilisation of working capital facilities was almost 90% during the last 6 months. The net cash conversion cycle was 178 days in FY19 (FY18: 161 days), with receivables period of 130 days (FY18: 92 days) and payable period of 56 days (FY18: 33 days). Debt service metrics is below average, ISCR & DSCR stood at 1.35x & 0.64x in FY19. Net cash accruals stood at INR 0.67 Crore in FY19 against CPLTD of INR 2.00 Crores as on 31.03.2018. Net Cash Accruals/Total Debt stood at 0.04x in FY19. The Company has a current ratio of 1.57x in FY19.

PROFILE

AFPL is a closely-held private limited company started in 2003 and promoted by the members of the Goel family. It manufactures wood plastic composite (WPC) foam boards and doors, PVC foam boards, windows and doors. The Company's manufacturing facility is in Bareilly, Uttar Pradesh. The manufacturing capacity of WPC and Sun Board is 1200 Tonnes and 600 Tonnes per annum. Company is having authorized share capital of INR 4.50 Crores and paid up capital of INR 3.41 Crores.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	18.17	18.43
EBITDA	Rs.Crs.	2.04	2.23
PAT	Rs.Crs.	0.16	0.08
Tangible Net Worth	Rs.Crs.	5.45	3.18
Total Debt/Tangible Net Worth	Times	3.06	5.54
Current Ratio	Times	1.57	1.54

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 Term Loan - Out-standing Sub-Limit (ODBD) - Sanctioned	Long Term	05.00 02.15 (02.00)	BWR B+ (Negative)	NA	NA	NA
2	Sub-Limit (FLC) - Sanctioned	Short Term	02.00	BWR A4	NA	NA	NA
Total			07.15	(Rupees Seven Crores and Fifteen 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
• Approach to Financial Ratios
• Manufacturing Companies
• Short Term Debt

For More Information Contact:

Analytical Contacts	Investor Contacts
Deepak Kumar Ratings Analyst deepak.k@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	5.00	_	5.00
Sub-Limit (FLC) - Sanctioned		(2.00)
Sub-Limit (ODBD) - Sanctioned	(2.00)
2	Term Loan - Out-standing	2.15	_	2.15
Total				7.15
TOTAL (Rupees Seven Crores and Fifteen lakhs Only)