Brand Alloys Pvt. Ltd

Brickwork Ratings assigns the ratings for the Bank Loan Facilities aggregating Rs. 20.50 Crs. of Brand Alloys Pvt. Ltd (BAPL or the Company)

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	15.50	Long Term	BWR BB + /Stable Assignment
Non Fund Based	5.00	Short Term	BWR A4 + Assignment
Grand Total	20.50	(Rupees Twenty Crores and Fifty 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

In arriving at the ratings, Brickwork ratings has essentially relied upon the Audited Financial statements of the company for FY19, FY20, FY21, projected financial statements for FY22 and FY23, information furnished by the company and their bankers, as well as information available in the public domain.

Brickwork Ratings has assigned ratings of BWR BB+, Stable for the long term bank loan facilities of Rs. 15.50 Crs of Brand Alloys Private Limited, and BWR A4+ for their short term bank loan facilities of Rs.5.00 Crs (aggregate rated amount Rs.20.50 Crs). The ratings factor in the successful completion of the curing period i.e. regular debt servicing of at least 90 days since the last default as indicated by the rating rationales of two other CRAs in May, 2021 - in terms of extant SEBI guidelines for assignment of a fresh non investment grade rating. It further factors in the extensive experience of the promoters, BAPL’s approved vendor position for vis-a-vis Indian Railways for supply of casnub bogies, assured product offtake through agreement with TATA Steel for conversion of Billets to TMT bars since the past 11 years and comfortable credit metrics as reflected by ISCR and DSCR levels. However the rating is constrained by small scale of operations, susceptibility to fluctuations in steel demand and prices of its inputs, stretched liquidity, and past default history.

The outlook has been assigned Stable as BWR believes that the business risk profile of the Company will be maintained over the medium term. The Stable outlook indicates a low likelihood of a rating change over the medium term. The rating outlook may be revised to Positive in case of significant improvement in revenues, improvement in liquidity and profitability, or to Negative if there is any deterioration in scale of operations together with deterioration in financial risk profile, or delays in debt servicing.

KEY RATING DRIVERS

Credit Strengths:

Long Track Record of Operations and extensive experience of the promoters :
The Company has an established track record in the steel sector since 1994. Moreover the promoters have extensive experience in running the business. Mr. Vikas Bansal is Managing Director, Mr. Satpal Bansal and Mr. Markanda Samanta are two directors of the company who have been in the company for more than a decade. It is a family run business and they are having adequate industry experience. Further, the Company is also supported by a professional team to look after its day to day operations.
Supply to Indian Railways :
The Company is an approved vendor of Casnub Bogies and other casting products for Indian Railways. It has an installed capacity of 10,000 MTPA for railway bogies, 5000 TPA for railway components and 5000 TPA for cast articles. The sales from this accounts for around 70% of the total revenues in FY21.
Agreement with Tata Steel Limited :
The Company has a renewable three year agreement with TATA Steel for conversion of Billets into TMT bars with pre determined conditions which include supply of raw material, transportation etc. by TATA. Thus, the Company enjoys an assured market for TMT bars. Further this agreement stands intact since the past 11 years.
Comfortable debt protection metrics and financial risk profile :
Total Debt coverage indicators, the interest service coverage ratio (ISCR) and debt service coverage ratio (DSCR), although lower than FY20 levels, are still comfortable at 3.02x and 1.24x, respectively, in FY21 (from 5.69x and 1.34x, respectively, in FY20) The deterioration was a result of decline in EBITDA from raw material price fluctuations. Further, TNW improved to Rs 54.30 crs in FY21 from Rs.53.34 crs in FY20 due to retention of profits. This also led to improvement in gearing level from 0.46x in FY20 to 0.59x in FY21.

Credit Risks:

Small scale of operations :
The total operating income (TOI) improved to Rs. 67.03 Crs in FY21 from Rs. 63.31 Crs in FY20. The scale is expected to remain small because of the highly competitive and fragmented nature of the industry.
Susceptible to volatility in prices of raw materials :
The raw-material is the major cost driver, accounting for around 80% of total cost of sales in FY21. The company lacks backward integration for its basic raw materials like iron ore and coal and the same has to be procured from the open market. Since the raw material is the major cost driver and the prices of which are volatile in nature, the profitability of the company is therefore susceptible to fluctuation in raw-material prices.
Intense competition in the industry :
The steel industry is highly fragmented with the presence of both organized and unorganized players in the downstream segment providing similar products/services. Hence, the company faces competition from regional players leading to intense competition and pricing pressures, which in turn affect the profitability margins of the company.
Stretched Liquidity :
The company’s liquidity stands stretched, as reflected by the elongated working Capital cycle at 154 days in FY21 and high average utilization of the cash credit limit around 91% for the last one year ended December 2021.
Past Default History :
The company delayed in servicing one of the term loans for the month of May’21 due to liquidity mismatch. However, this term loan was regularized and has been paid off in Aug 2021 and No Dues Certificate has been obtained for the same. Further, all the repayments are regular in the past 6 months as per the banker feedback and as per account statements.

ANALYTICAL APPROACH - Standalone

Standalone

RATING SENSITIVITIES

Positive- Substantial increase in the scale of operations and improvement in liquidity position may lead to a positive rating action.

Negative- Deterioration in liquidity position, deterioration in financial parameters and delays in debt servicing may lead to a negative rating action.

LIQUIDITY INDICATORS - Stretched

LIQUIDITY INDICATORS: Stretched

The company’s liquidity stands stretched, as reflected by the utilisation of the cash credit limit for the last one year ended December 2021 . During the last 12 months till December 2021, the month-end balance in its cash credit account was 91% on an average against the sanctioned limit of Rs. 11.50 Crs. However, the current ratio of 1.63 times in FY21 (FY20-1.26 times) stands adequate. The working Capital cycle is also stretched at 154 days due to the elongated receivables days of 200 days in Fy21 . This was due to the delayed payment from its debtors, during the year end.

The GECL and CECL loans were also availed during the onset of pandemic in FY21 amounting to Rs. 2.79 crs out of the total sanctioned loan of Rs. 4.45 crs. The repayments of these loans were met out of the cashflows of the company and the same is expected going forward as well as reflected by comfortable ISCR and DSCR ratios in FY22 and FY23. The liquidity position is expected to remain at the same level as the company does not have any major debt-led capex plan in the near term.

ABOUT THE ENTITY

Incorporated in 1994, BAPL, is a Kolkata based company having its manufacturing unit in Serampore, West Bengal. The Company has 35 acres of own land and more than 160 employees are working in the unit. The company is engaged in manufacturing of TMT bars, railway components and bogies with the installed capacity of 60,000 MTPA for TMT bars, 10,000 MTPA for railways bogies, 5000 TPA for railway components and 5000 TPA for cast articles. Further, BAPL is into an agreement with Tata Steels Limited for conversion of billets into TMT bars since the last 11 years and the latest agreement stands valid from July 2019- June 2022). From TATA Steels, the company only receives conversion charges. All kinds of process consumables are procured and managed by BAPL. However, in case BAPL makes arrangements for transportation of the RM/FG from their works on notification by TSL, the transportation charges are paid at the rates based on mutual agreement between both parties.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	67.03	63.31
EBITDA	Rs.Crs.	5.11	10.59
PAT	Rs.Crs.	0.96	5.16
Tangible Net Worth	Rs.Crs.	54.30	53.34
Total Debt/Tangible Net Worth	Times	0.59	0.46
Current Ratio	Times	1.63	1.26

KEY COVENANTS OF THE FACILITY RATED

Standard Covenants for bank loans

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	15.50	BWR BB+/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	5.00	BWR A4+ (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		20.50	(Rupees Twenty Crores and Fifty lakhs 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
Richa Sonthalia Ratings Analyst richa.s@brickworkratings.com	Anuradha Gupta Director - Ratings anuradha.g@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Brand Alloys 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	Punjab National Bank	Cash Credit - Sanctioned	11.50	_	11.50
2	Punjab National Bank	GECL - Out-standing	4.00	_	4.00
3	Punjab National Bank	BG/ILC - Sanctioned	_	5.00	5.00
Total			15.50	5.00	20.50
TOTAL (Rupees Twenty Crores and Fifty lakhs Only)

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