RATING RATIONALE
11 Jan 2021
Aaryan Lamifab Pvt. Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.8.04 Crs. of Aaryan Lamifab Pvt. Ltd.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
|
Cash Credit
Sanctioned
Working Capital Demand Loan Sanctioned Covid -19 Emergency Line Credit Sanctioned |
06.50
00.65 00.89 |
Long Term | BWR BB (Stable) |
| Sub Total | 08.04 | ||
| Grand Total | 08.04 | (Rupees Eight Crores and Four lakhs Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR believes that Aaryan Lamifab 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.
KEY RATING DRIVERS
BWR has essentially relied upon the audited financial statements of Aaryan Lamifab Pvt. Ltd. of FY18, FY19, FY20 and projected financial statements of FY21, FY22, publicly available information and information /clarifications provided by the entity’s management. The rating draws strength from the vast business experience of the directors, established track of operations, and average financial risk profile. However, the rating is constrained by the scale of operations, profitability and competition from other established players in the market.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities.
Credit Strengths:
- Locational Advantage :
The company/Firm is located in Bahadurgarh cluster and thus has a competitive advantage in terms of skilled labor, logistics, production knowledge and vendors making the company more efficient and cost effective.
- Established experience of management :
The Company is a private limited entity efficiently managed by Mr. Ankit Gupta, Mr. Amit Bansal and Mrs. Sweety Bansal who are highly skilled businessmen and have more than a decade of experience in the same line of business. Mr. Amit Bansal has 20 years of experience in the same line of business.
- Improved profit margin and net worth :
The operating profit margin and the net profit margin of the company marginally increased from 2.28% & 0.63% in FY 19 to 3.46% & 1.02% in FY 20. The tangible net worth of the company is Rs. 7.24 Crs. TNW has improved due to retention of profit and additional paid-up capital brought in the company by the shareholders in FY 20. The analyzed TNW of the company is Rs. 12.48 Crores due to unsecured loans from directors, friends and relatives for Rs. 10.49 Crs in FY 20.
- Moderate coverage ratios :
ISCR of the company is moderate at 2.69x in FY 20 showing adequate interest repayment capacity of the company.
Credit Risks:
- Competition in the Industry:
Entry barriers in the industry are low on account of limited capital and technology requirements leading to intense competition from unorganized and organized players in the market and limiting the pricing power resulting in low profitability.
- High Gearing and average debt protection metrics :
The Gearing of the company is stretched with Total Debt/TNW and TOL/TNW standing at 3.96x & 11.38x in FY 20. However, the analyzed total debt/ TNW is 1.87x in FY 20. The Debt Protection Metrics of the co. is average i.e. DSCR is 1.28x in FY20 indicating difficulty to meet the debt obligations in the future.
- Elongated receivables days :
The company’s account receivable is high at 206 days which is a concern. However, it is substantially offset by the nearly matching payable days at 186 days, thus causing the conversion cycle to remain low at 32 days in FY 20.
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 further increase its scale of operations by improving its revenue, profitability margins, improvement in the overall financial profile, as usual maintaining its debt obligations and efficiently managing its working capital will be the key rating sensitivities.
Positive: The ratings may be upgraded if revenue, profitability, liquidity, gearing and overall credit profile show substantial improvement.
Negative: The rating may be downgraded in case there is a significant deterioration in the business and financial risk profile of the company from its current level.
LIQUIDITY POSITION
The Company has Cash & Bank balance of INR 0.09 Cr in FY20. The long term borrowings of INR 22.29 crores in FY20 which represents secured loan from banks for (Rs. 11.7Cr) and unsecured loans from directors, friends, and relatives of Rs. 10.49 Crores. The Debt protection metrics of the company is satisfactory in FY20 as ISCR & DSCR stand at 2.69x & 1.28x. The CC utilization of the last 9 months is approximately 80%. The current ratio of the company is 1.14x in FY20 which is below the industry average. The Company has a low conversion cycle of 32 days in FY20. Net cash accruals/ total debt is low at 0.09x in FY20 and the net cash accruals/ CPLTD stands at 2.27x in FY 21. Also, the average % utilization in the CC account is 80% against the sanctioned limit of Rs. 6.50 Crs, indicating the availability of funds to meet any unforeseen short-term requirement. Hence, Overall liquidity is adequate.
PROFILEAaryan Lamifab Pvt. Ltd. was incorporated on 26 August 2011. The directors of the company are Mr. Amit Bansal, Mr. Ankit Gupta, and Mrs. Sweety Bansal. The company’s registered office is at D-48, Inderprastha Apartment, Sector- 14, Rohini, Delhi-110085. The main work of the company is the manufacturing of lamination of fabrics with Eva and foams. It is laminated fabrics that are used in the manufacturing of soft leather in briefcases, automobile seating systems, footwears, ladies handbags, furniture, upholstery, purses, etc. The company mainly deals with the laminated fabrics used in footwear. The company was previously having its plant in Delhi. In Nov 2019, the company shifted its operations into the new plant in Bahadurgarh, Jhajjar district, Haryana. The unit is situated in an industrial area. The total capacity of the plant is 84 lakh meters to manufacture laminated fabrics.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 105.83 | 99.88 |
| EBITDA | Rs.Crs. | 3.67 | 2.28 |
| PAT | Rs.Crs. | 1.08 | 0.63 |
| Tangible Net Worth | Rs.Crs. | 7.24 | 4.87 |
| Total Debt/Tangible Net Worth | Times | 3.96 | 2.97 |
| Current Ratio | Times | 1.14 | 1.18 |
NA
NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY
| CRA Name | Date | Amount | Rating |
|---|---|---|---|
| CRISIL | 22 Dec 2020 | 25.00 | CRISIL BB-/ Stable (Issuer not Cooperating) |
| S.No | Current Rating (2021) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2020 | 2019 | 2018 | ||||
| Fund Based | ||||||||||
| 1 | Cash Credit - SanctionedWorking Capital Demand Loan - SanctionedCovid -19 Emergency Line Credit - Sanctioned | Long Term | 06.5000.6500.89 | BWR BB(Stable) | NA | NA | NA | |||
| Total | 08.04 | (Rupees Eight Crores and Four 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 | |
|---|---|
|
Muskan Agrawal Rating Analyst muskan.a@brickworkratings.com |
Satvinder Kumar Gakhar Associate Director - Ratings B : +91 11 2341 2232 satvinder.g@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 | Cash CreditSanctioned | 6.50 | _ | 6.50 |
| 2 | Working Capital Demand LoanSanctioned | 0.65 | _ | 0.65 |
| 3 | Covid -19 Emergency Line CreditSanctioned | 0.89 | _ | 0.89 |
| Total | 8.04 | 0.00 | 8.04 | |
| TOTAL (Rupees Eight Crores and Four 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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