Aryann Chemical Trading Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 70.00 Crs. of Aryann Chemical Trading Pvt. Ltd. (ACTPL or the Company)

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	25.00	Long Term	BWR BBB - /Stable Assignment
Non Fund Based	45.00	Short Term	BWR A3 Assignment
Grand Total	70.00	(Rupees Seventy Crores Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK

Brickwork Ratings assigns the ratings of BWR BBB-/Stable to the long term fund based facilities of Rs. 25 crores and BWR A3 to the non fund based facilities of ACTPL.

The ratings reflect the extensive experience of the promoters in the chemical industry, established relationships with customers, diversified product profile and a moderate financial risk profile. These strengths are partially offset by high gearing, inherent business risk characterized by operating profit margins’ susceptibility to price volatility, foreign exchange fluctuations and presence in highly competitive and fragmented industry

Outlook: Stable

The outlook is Stable since BWR expects that ACTPL's business risk profile will be maintained over the medium term.

KEY RATING DRIVERS

Credit Strengths:

Experienced Promoters :

ACTPL is promoted by Mr. Amit Bansal, Mr. Nishant Vaish and Mr. Madhur VinodKumar Gupta - Directors who are associated with the company since incorporation and look after the overall operations along with other key managerial personnel. Mr. Amit and Mr. Nishant possess a healthy experience of more than two decades in industry majority of which has been gained by them due to their association with 'Yug International Pvt Ltd' as a director and Mr. Madhur is an entrepreneur in a chemical trading company. Extensive experience of the management ensures established relationships with reputed chemical manufacturers & suppliers
Diversified product portfolio & industry revenue base :
ACTPL is well-diversified with more than 50-60 chemical products traded, including methanol, phenol, vinyl acetate monomer, Butyl acrylate, acetic acid, Spirdane D-60., Cyclohexanone, Melamine, Tetrahydrofuran, Acrylamide, Isopropyl alcohol, as the major ones. Moreover, the products dealt with by the company find application in diversified sectors such as Paint, Ink, Cosmetic, Plywood, Adhesive and Pharmaceutical etc. However, the revenues are diversified with methanol,vinyl acetate monomer, Acetic Acid and Phenol contributing 55.16% in 9MFY22(FY21: 53.21%).
Established relationship with reputed with suppliers & customers :

ACTPL is an authorized dealer of Deepak Phenolics Limited, Deepak Fertilizers and Petrochemical Corporation Limited, Pidilite Industries Limited and Gujarat State Fertilizers & Chemicals Limited, each of which is a counterparty of repute and strong credit profile.. Moreover, the supplier & customer profile of the company remained reputed & diversified marked by top five suppliers contributing 17.11% of purchases in FY21. Further, the customer profile of the company also remained diversified marked by top five customers contributed 12.73% of the net sales in FY21
Healthy financial risk profile :

The financial risk profile remains healthy, marked by total operating income of Rs. 548 Cr in FY21 (only seven months operations) which increased with a growth close to 3x in 9MFY22. Significant increase in the revenue is mainly on account of increase in customer base, product line and volume. The debt coverage indicators of the company marked by ISCR & DSCR stood comfortable, mainly on account of lower long term debt given the trading nature of business.
Furthermore, with the part conversion of unsecured loans from promoters and family into capital, the adjusted TOL/TNW and overall gearing stood moderate at 4.83 times and 0.37 times respectively as on March 31, 2021. Moreover, the adjusted tangible networth of the company also stood at Rs. 28.12 crore as on March 31, 2021 (9MFY22:56.15 crore) which limits the financial flexibility of the company to an extent.

Credit Risks:

Limited Operational History :

ACTPL has been in operations only since August ‘20 resulting in an operational history of only 18 months till date with FY22 expected to be the first full year of operations.
Thin profit margins :

The company operates at thin profit margins due to the chemical trading nature of operations. In FY21, the PBILDT margin of the company stood at 3.22% (9MFY22: 3.20%). Moreover, limited value-addition leads to lower operating margin, and the PAT margin also remains in the similar range at 2.11%-2.30% during FY21 & 9MFY22.
Intense competition and fragmented Industry :
The company operates in trading of speciality chemicals industry, which is marked by the presence of several mid to big size players in the organized as well as unorganized sector. Also, due to the trading nature of its operations, the entry barriers remain low, resulting in high competition and consequently limited pricing flexibility which limits the pricing power of the company.
Susceptibility of profitability margins to price volatility along with foreign exchange fluctuation risk :
The prices of the chemicals traded by ACTPL are inherently volatile due to their strong linkage with their input prices (major inputs comprise of crude oil derivatives, metal derivatives) or due to their linkage with international market prices as well as other factors that affect the domestic demand and supply. As a result, ACTPL profitability is exposed to adverse movement in the prices of these chemicals. However, to mitigate this effect of volatility on its profitability, ACTPL procures the majority of the chemical products against back to back sales orders. Further, ACTPL also keeps minimal inventory of these products, (inventory holding of 17 days in FY21), which also mitigates this risk to a certain extent. Moreover the company also imports traded chemicals and hence, it remains exposed to foreign exchange fluctuation risk.

ANALYTICAL APPROACH - Standalone

BWR has essentially relied upon the audited financials from FY21 and 9MFY22 provisional financials,projections till FY24, publicly available information and information/clarification provided by the management

RATING SENSITIVITIES

Positive factors –

Sustained Growth in the total operating income on back of increased demand from existing products as well as effective diversification in product profile
Sustenance of PBILDT margins
Sustenance of comfortable leverage and debt coverage profile along with lean working capital cycle

Negative factors –

Deterioration in the profit margins with PAT margins reaching below unity level on a sustained basis
Inability to achieve the envisaged increase in the scale of operations coupled with capital structure & debt coverage indicators, and liquidity position.

LIQUIDITY INDICATORS - Adequate

The liquidity position of ACTPL stood adequate marked by healthy net cash accruals, healthy free cash & bank balance, and moderate current ratio. ACTPL is expected to generate net cash accruals worth Rs.37.21 Cr. and Rs.52.88 crore in FY22 & FY23 respectively as against nil principal repayment.. Bank limit utilization is low averaging at 53% for the six months ended January 2022. The current ratio is healthy at 1.28 times as on March 31, 2021 and ACTPL had free cash & bank balance of Rs.5.40 Cr. as on Dec 31, 2021.

ABOUT THE ENTITY

ACTPL was incorporated on 07th August 2020, registered office located at Nariman Point, Mumbai. The company is primarily engaged in trading of industrial chemicals used in Paint, Ink, Cosmetic, Plywood, Adhesive, Pharmaceutical and other allied industries. The company majorly derives sales and procure raw material from the domestic market. Currently the company is importing the goods on the basis of High Seas Purchase and Bond Transfer along with few direct imports and are sold to Trader, Wholesaler, Manufacturers, Retailers and Distributing agencies.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	548.68	Not Available
EBITDA	Rs.Crs.	17.65	Not Available
PAT	Rs.Crs.	12.62	Not Available
Tangible Net Worth	Rs.Crs.	17.66	Not Available
Total Debt/Tangible Net Worth	Times	1.18	Not Available
Current Ratio	Times	1.28	Not Available

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

ANY OTHER INFORMATION

RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	25.00	BWR BBB-/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	45.00	BWR A3 (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		70.00	(Rupees Seventy Crores Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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

Analytical Contacts
Roma Gupta Ratings Analyst roma.g@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Aryann Chemical Trading Pvt. Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Axis Bank Ltd.	Cash Credit - Sanctioned	10.00	_	10.00
2	Axis Bank Ltd.	Letter of Credit - Sanctioned	_	20.00	20.00
3	ICICI Bank	Letter of Credit - Sanctioned	_	10.00	10.00
4	ICICI Bank	Letter of Credit - Proposed	_	15.00	15.00
5	ICICI Bank	Cash Credit - Sanctioned	5.00	_	5.00
6	ICICI Bank	Cash Credit - Proposed	10.00	_	10.00
Total			25.00	45.00	70.00
TOTAL (Rupees Seventy Crores Only)

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