RATING RATIONALE
24 Aug 2020
Apollo Vikas Steels Pvt. Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.50.00 Crs. of Apollo Vikas Steels Pvt. Ltd.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
| Cash Credit Sanctioned | 08.00 | Long Term | BWR BB - (Stable) |
| Sub Total | 08.00 | ||
| Non-Fund Based | |||
| Letter of Credit Sanctioned | 42.00 | Short Term | BWR A4 |
| Sub Total | 42.00 | ||
| Grand Total | 50.00 | (Rupees Fifty Crores Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR has essentially relied on Audited financials upto FY19, provisional financial for FY20, projected financial, publicly available information and information & clarifications provided by management.
The rating draws comfort from established track record and experienced promoters with long standing established relationships with clients and funding support from the directors. However, the rating is constrained by below average financial risk profile, intense competition and thin profit margins.
BWR believes that Apollo Vikas Steels 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.
KEY RATING DRIVERS
Credit Risk:
- Profitability susceptible to fluctuations in foreign exchange rates & steel prices: It takes around four to five months on an average to completely dismantle a ship and generate revenue. Hence, the firm has an inventory risk for ships that are under the process of breaking due to the time lag involved between the ship’s purchases and selling of scrap, given the high volatility faced in steel prices. While the firm hedges such risks by booking forward contracts, it remains exposed to adverse movement in exchange rates. Operating profit margins are thin due to high raw material cost and vulnerable due to steel price fluctuations.
- Intense competition & thin profit margins: The firm faces intense competition from large and small existing players operating at Bhavnagar as well as neighbouring countries. Profit margins are also thin due to low value additive nature of business.
Credit Strength:
- Experienced Management and Group Support: Extensive experience of the partners of more than 3 decades will help the firm and support the business risk profile.
- Funding support from the partners: The firm has advantage of the group support and the need based fund support from the partners and their relatives and friends.
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
Positive:
- Substantial and sustainable growth in revenue with stable profitability and higher net cash accrual.
- Improvement of financial risk profile and better management of liquidity.
Negative:
- Fall in revenue and deterioration in profit margins with decline in cash accruals.
- Deterioration of financial risk profile and stretched working capital cycle.
Liquidity Position: Stretched
Low net cash accruals in FY20 as the company has reduced its scale of operations due to unfavourable market conditions. However, the need based funding support from the promoters will support the liquidity position of the company.
PROFILEApollo Vikas Steels Pvt Ltd was incorporated in year 1982 in Bhavnagar. It is a part of Apollo Vikas Group and is engaged in the business of ship breaking and has a furnace division where it produces steel ingots from scrap. The firm has its registered office and a plot at Alang port, Bhavnagar, Gujarat. The business operation of the firm are managed by Mr. Vinod Rai Patel along with other directors.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 18-19 (Audited) |
FY 17-18 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 110.02 | 41.96 |
| EBITDA | Rs.Crs. | 3.19 | 0.95 |
| PAT | Rs.Crs. | 0.29 | -0.32 |
| Tangible Net Worth | Rs.Crs. | 9.51 | 9.22 |
| Total Debt/Tangible Net Worth | Times | 1.51 | 2.25 |
| Current Ratio | Times | 4.24 | 1.27 |
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 | Long Term | 08.00 | BWR BB-(Stable) | NA | NA | NA | |||
| Non-Fund Based | ||||||||||
| 2 | Letter of Credit - Sanctioned | Short Term | 42.00 | BWR A4 | NA | NA | NA | |||
| Total | 50.00 | (Rupees Fifty 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.
Hyperlink/Reference to applicable Criteria : For More Information Contact:| Analytical Contacts | Investor Contacts |
|---|---|
|
Siddharth Shah Lead Analyst siddharth.s@brickworkratings.com |
Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com |
|
Dileep Narayan Singh dileep.s@brickworkratings.com |
|
| 1-860-425-2742 | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Cash CreditSanctioned | 8.00 | _ | 8.00 |
| 2 | Letter of CreditSanctioned | _ | 42.00 | 42.00 |
| Total | 50.00 | |||
| TOTAL (Rupees Fifty 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 |
Ratings are not a recommendation or suggestion ,directly or indirectly, to you or any other person, to buy sell, make or hold on any investement,loan or security or to undertake any investement strategy with respect to any investment,loan or security or any issuer.
Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency, accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. BWR is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a leading public sector bank, as its promoter and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.
Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented "as is" without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons.