Friends Alloys

Brickwork Ratings assigns the long-term ratings of BWR BBB- and short-term ratings of BWR A3 for the Bank Loan Facilities of Rs. 84.85 Crs. of Friends Alloys

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	81.35	Long Term	BWR BBB - /Stable Assignment
Non Fund Based	3.50	Short Term	BWR A3 Assignment
Grand Total	84.85	(Rupees Eighty Four Crores and Eighty Five lakhs 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 has assigned a long-term rating of BWR BBB-/Stable and short-term rating of A3 to the bank loan facilities of Friends Alloys, with the total sanctioned exposure aggregating to Rs. 84.85crore.

The rating considers the promoters’ strong experience and support, along with the firm's moderate financial risk profile. However, it is limited by high competition, volatility in raw material prices, working capital-intensive operations, and concentration risk. Going forward, the firm's ability to improve profitability, strengthen liquidity, and overall credit quality will be the key rating sensitivities.

The rating outlook is assigned as “Stable,” reflecting BWR’s expectation that Friends Alloys business risk profile will remain steady over the medium term. A stable outlook indicates a low probability of a rating change during this period. The outlook may be revised to “Positive” if the company achieves sustained improvement in revenue and profitability margins, while it may be revised to “Negative” in the event of a deterioration in its financial risk profile.

KEY RATING DRIVERS

Credit Strengths:

• Vast experience of promoters for over two decades in the long steel product industry :

  Friends Alloys has established a satisfactory operational track record of more than two decades in the steel industry. The firm is managed by Mrs. Chitra Sharma, who oversees overall administration, strategic planning, and financial management. Mr. Paras Sharma is actively involved in business development, marketing, and operational management, while Mr. Varun Sharma contributes to the day-to-day operations of the business. The promoters are supported by a qualified and experienced management team as well as competent technical personnel, which facilitates smooth execution of operations and effective decision-making. 

• Efficient working capital operations :

  Friends Alloys has maintained efficient working capital operations, although the gross current asset (GCA) cycle moderated to 84 days in FY26 (Provisional) from 78 days in FY25. The firm markets its products through a distributor network spread across Himachal Pradesh and generally receives advance payments from customers, with the balance amount being realized within six months. Inventory holding increased to 72 days as on March 31, 2026 (Provisional), compared to 62 days as on March 31, 2025, primarily due to higher stock levels maintained to support business operations. Debtor days remained comfortable at 22 days as on March 31, 2026 (Provisional), reflecting timely realization of receivables. Creditor days increased to 10 days from 6 days during the same period, providing marginal support to working capital requirements. As the firm primarily procures raw materials from domestic suppliers and benefits from an established customer base, Brickwork believes that its working capital operations are expected to remain efficient over the near to medium term.

• Adequate demand for the manufactured products :

  The firm manufactures a wide range of iron and steel products across the value chain, including MS flats, channels, angles, and other structural steel products. These products find extensive application in sectors such as construction, infrastructure development, fabrication, and steel rolling and re-rolling mills. The demand for the firm's products is supported by the growing infrastructure and construction activities in the region. The firm markets its products under the brand name “KAVACH Steel”, which enjoys moderate presence and acceptance in the regional market, supported by its established customer relationships and consistent product quality.

Credit Risks:

• Moderate capital structure and debt coverage indicators :

  The firm's debt profile primarily comprises term loans availed for the recently completed capex and working capital borrowings in the form of Cash Credit (CC) limits. The capital structure remained moderate, with overall gearing increasing marginally to 1.75x as on March 31, 2026 (Provisional) from 1.67x as on March 31, 2025, owing to higher debt levels. The tangible net worth improved to Rs. 43.01 crore as on March 31, 2026 (Provisional), supported by promoter contribution and accretion of profits to reserves. The debt coverage indicator, represented by TD/NCA, moderated to 8.01x in FY26 from 6.33x in FY25 due to the increase in total debt following the capex undertaken by the firm. Considering improved scale and profitability with accretion of profits to net worth, and repayment of term loan with no major debt-funded capex planned in the near term, the firm's capital structure is expected to improve going forward and improvement in TD/NCA.

• Cyclicality in the steel industry :

  The firm's operates in the domestic steel industry, which is inherently cyclical and characterized by fluctuations in demand, raw material prices, and steel realizations. Historically, the industry has witnessed periods of downturn due to excess capacity and oversupply, leading to pressure on steel prices and profitability of industry participants, including Friends Alloys. Consequently, the firm's cash flows remain susceptible to adverse movements in the steel cycle and changes in market conditions. Further, demand for the firm's products is closely linked to the performance of end-user industries such as construction, infrastructure, and real estate. Any slowdown in these sectors or adverse changes in demand-supply dynamics could impact sales volumes, realizations, and overall financial performance of the firm.

• Constitution as a partnership firm :

  Being a partnership firm, Friends Alloys has inherent risk of withdrawal of partner’s capital at the time of personal contingency. It restricts access to external borrowings where net worth and partners’ creditworthiness are the key factors affecting credit decision of the lender. Hence, limited funding avenues and limited financial flexibility restricts growth in the firm’s scale of operations.

• ­Geographical concentration :

  The firm's revenue is entirely derived from sales in Himachal Pradesh, Punjab, Haryana, Chandigarh, Jammu & Kashmir, and parts of Uttar Pradesh, resulting in significant geographical concentration. Consequently, its business performance remains exposed to regional demand trends, economic conditions, and industry developments within the state. Any slowdown in construction, infrastructure, or industrial activity in the region could adversely impact the firm's revenue generation and cash flow position.

ANALYTICAL APPROACH - Standalone

Standalone - for arriving at its ratings, BWR has considered the standalone performance of Friends Alloys. BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive Factors
• Growth in scale of operations along with sustained PBILDT margins above 5.5%.
• Improvement in capital structure, with Total Debt/TNW remaining below 1.0x on a sustained basis.
• Efficient working capital management resulting in lower reliance on external borrowings and stronger liquidity.

Negative Factors
• Deterioration in operating profitability, with PBILDT margins remaining below 4.0% on a sustained basis.
• Decline in revenue levels below Rs. 400 crore or weakening of interest coverage metrics, with ISCR falling below 3.0x.
• Any substantial debt-funded expansion or elongation in the working capital cycle adversely affects the financial risk profile.
• Any significant increase in working capital reliance leading to liquidity stress, or Total Debt/Tangible Net Worth rising beyond 2.0x.

LIQUIDITY INDICATORS - Adequate

The company maintains an adequate liquidity position, supported by healthy cash accruals, a moderate cash balance of Rs. 0.46 crore, and moderate utilization of working capital limits at 76.72% over the past 12 months ended May 2026. Net cash accruals of Rs. 9.49 crore in FY25 were sufficient to cover debt repayment obligations, while projected accruals of Rs. 15.29 crore in FY27 are expected to remain comfortably above scheduled repayments of Rs. 7.83 crore. Liquidity is further supported by a satisfactory current ratio of 1.27 times in FY25 and efficient working capital management, as reflected in receivable days of 22. The company's debt protection metrics remain comfortable, and its capital structure has strengthened, with the Total Debt to Tangible Net Worth ratio improving to 1.67 times in FY25, indicating a lower reliance on external borrowings and enhanced financial flexibility.

ABOUT THE ENTITY

Friends Alloys (FAY) was established as a partnership firm in 2003 and is currently managed by Mrs. Chitra Sharma, Mr. Paras Sharma, and Mr. Varun Sharma, sharing profits and losses in the ratio of 50%, 25%, and 25%, respectively. The firm is engaged in the manufacturing of steel products such as MS ingots and structural steel products, including MS flats, channels, and angles, at its manufacturing facility located at Baddi, Himachal Pradesh. The facility has an installed capacity of 85,000 MT per annum for its steel rolling mill operations. The firm markets its products under the brand name KAVACH Steel.

ESG Profile

The company demonstrates a Adequate ESG profile based on its environmental, social, and governance practices.

Environmental: Environmental risks are driven by high water usage, waste generation, and reliance on energy-intensive processes, making disclosures on water consumption, waste-management practices, renewable energy share, and emissions levels particularly important.

Social: Social factors hinge on adherence to labour laws, accident prevention frameworks, and human-capital development, with metrics such as workforce mix, safety performance, and training initiatives offering insights into operational resilience.

Governance: Governance assessment focuses on board independence, committee effectiveness, and robustness of compliance systems, supported by readily available disclosures on board structure, audit mechanisms, and risk-management practices.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 23 - 24 (Audited)	FY 24 - 25 (Audited)	FY 25 - 26 (Provisional)
Operating Revenue	Rs.Crs.	296.36	316.27	321.72
EBITDA	Rs.Crs.	13.15	16.92	14.72
PAT	Rs.Crs.	3.58	3.75	3.81
Tangible Net Worth	Rs.Crs.	30.64	34.54	43.01
Total Debt / Tangible Net Worth	Times	1.93	1.67	1.75
Current Ratio	Times	1.31	1.27	1.45

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

Not Applicable

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

Facilities	Current Rating  (2026)			2025		2024		2023
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	81.35	BWR BBB-/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	3.50	BWR A3 (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		84.85	(Rupees Eighty Four Crores and Eighty Five lakhs Only)

Hyperlink/Reference to applicable Criteria

• General Criteria
• Short Term Debt
• Approach to Financial Ratios
• Manufacturing Company
• Manufacturing Company

Analytical Contacts
Manu C V Ratings Analyst cv.manu@brickworkratings.com	Ravi Rashmi Dhar Director - Ratings ravi.d@brickworkratings.com
Media Contact | media@brickworkratings.com	Client Support | clientsupport@brickworkratings.com

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)	Complexity of the Instrument
1	HDFC Bank	Term Loan - Out-standing	0.73	_	0.73	Simple##
2	HDFC Bank	Term Loan - Out-standing	1.15	_	1.15	Simple##
3	HDFC Bank	Term Loan - Out-standing	5.09	_	5.09	Simple##
4	HDFC Bank	Term Loan - Out-standing	0.67	_	0.67	Simple##
5	HDFC Bank	Term Loan - Sanctioned	9.00	_	9.00	Simple##
6	HDFC Bank	Term Loan - Sanctioned	15.00	_	15.00	Simple##
7	HDFC Bank	Term Loan - Out-standing	6.71	_	6.71	Simple##
8	HDFC Bank	Cash Credit - Sanctioned	43.00	_	43.00	Simple##
9	HDFC Bank	Bank Guarantee - Sanctioned	_	3.50	3.50	Simple##
Total			81.35	3.50	84.85
TOTAL (Rupees Eighty Four Crores and Eighty 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.