RATING RATIONALE
12 Nov 2020
Anand Metal Engineering Pvt. Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.7.45 Crs. of Anand Metal Engineering Pvt. Ltd.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
|
Term Loan
Proposed
Cash Credit Proposed Cash Credit Sanctioned |
05.35
01.60 00.50 |
Long Term | BWR B (Stable) |
| Sub Total | 07.45 | ||
| Grand Total | 07.45 | (Rupees Seven Crores and Forty Five lakhs Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR believes that Anand Metal Engineering 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
BWR has essentially relied upon the audited financial statements of Anand Metal Engineering Pvt. Ltd. of FY18,FY19,FY20 and publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the business experience of the promoters, improving profit margins with a modest financial risk profile.
However, the rating is constrained by the debt funded capex, small scale of operations coupled with a low tangible net worth and working capital intensive nature of operations, customer concentration risks, and sensitivity to external factors including high level of competition.
Credit Strengths:
- Experienced Promoters :
The company has been incorporated in the year 2007 and the experience of the promoters is more than 3 decades in the electronic components industry. They are supported by a team of highly qualified individuals.
- Modest Financial Risk Profile :
The company has a modest gearing as reflected by the TD/TNW which stands at 1.27X in FY20. The ISCR stands moderate at 1.83X in FY20 improving from 1.63X in FY19. The current ratio stands moderate at 1.68X in FY20.
- Improving Profit Margins :
The profit margins of the company as indicated by Operating Profit Margins & Net Profit Margins have improved and stand at 11.39% & 1.95% in FY20 from 7.69% & 1.01% in FY19 respectively.
Credit Risks:
- Small Scale of Operations with Low Tangible Net Worth :
The company has a small scale of operations as indicated by a topline of Rs 1.18cr in FY20 reducing from Rs 1.77cr in FY19. The company has a low tangible net worth which stands at Rs 0.73cr in FY20.
- Major Debt Funded Capex :
The company is expanding into the business of manufacturing of non-woven fabrics. The total cost of project is expected to be of Rs 7.65cr which shall be funded by the bank to an extent of Rs 5.35cr and the promoter's contribution shall be in the tune of Rs 2.30cr out of which Rs 1.22cr has been paid by the promoters for advance against new machinery. In this connection, the company has stated that, most of the work and payments will start from November 2020 and which shall be completed by the time the machinery arrives for installation. The machinery is expected to arrive in March 2021 and the expected date of commercial operations is April 2021.
- Stretched Working Capital Cycle :
The working capital cycle as indicated by GCA to Net Sales stands relatively stretched at 109.32% in FY20 deteriorating from 66.66% in FY19.
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 its scale of operations and achieve its expected date of commercial operations, ensure timely servicing of its debt obligations and improving the Liquidity and Gearing would be its key rating sensitivity.
Positive: The outlook may be revised to Positive if the company records significantly better-than-expected growth in revenues along with improvement in profitability levels and efficient working capital management, resulting in better debt coverage metrics and liquidity profile.
Negative: The outlook may be revised to Negative if the company reports significantly lower than expected performance, resulting in lower than estimated coverage indicators and a weaker liquidity position.
LIQUIDITY POSITION
Liquidity : Stretched
Liquidity profile of the company is stretched as reflected from the modest risk profile.The coverage ratios as reflected by ISCR & DSCR stand at 1.83X & 0.99X in FY20.The net cash accruals of the company stand at Rs 0.06cr in FY20. The average utilization stands at 83.48% for a period of January 2020 to September 2020. The company has reported a moderate current ratio at 1.68X in FY20.
Anand Metal Engineering Pvt Ltd was established in 2007 and is in the business of manufacturing of electric lamp components mainly FTL Caps. Initially the Company did job work of FTL Caps manufacturing for other industries. In 2016, the Company started its own production at its plant in Dewas. The Company is planning to diversify and take up production of Non Woven Fabric. Its main application is in making fabric carry bags/packaging bags for daily uses.
The company has earned a revenue in tune of Rs 0.24cr for a period of April-September 2020.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 1.18 | 1.82 |
| EBITDA | Rs.Crs. | 0.13 | 0.14 |
| PAT | Rs.Crs. | 0.02 | 0.02 |
| Tangible Net Worth | Rs.Crs. | 0.73 | 0.71 |
| Total Debt/Tangible Net Worth | Times | 1.27 | 1.08 |
| Current Ratio | Times | 1.68 | 1.88 |
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2022) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2019 | 2018 | 2017 | ||||
| Fund Based | ||||||||||
| 1 | Term Loan - ProposedCash Credit - ProposedCash Credit - Sanctioned | Long Term | 05.3501.6000.50 | BWR B(Stable) | NA | NA | NA | |||
| Total | 07.45 | (Rupees Seven Crores and Forty Five lakhs 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 | |
|---|---|
|
Siddhi Kadakia Ratings Analyst D : +91 22 6745 6648 B : +91 22 2831 1426, +91 22 2831 1439 siddhi.k@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 | media@brickworkratings.com | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Term LoanProposed | 5.35 | _ | 5.35 |
| 2 | Cash CreditProposed | 1.60 | _ | 1.60 |
| 3 | Cash CreditSanctioned | 0.50 | _ | 0.50 |
| Total | 7.45 | |||
| TOTAL (Rupees Seven Crores and Forty Five lakhs 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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