Niknam Chemicals Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 20.09 Crs. of Niknam Chemicals Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (01 Sep 2020)	Present
Fund Based	7.29	9.29	Long Term	BWR BB/Stable Assignment	BWR BB /Stable Reaffirmation
Fund Based	8.00	10.80	Short Term	BWR A4+ Assignment	BWR A4 + Reaffirmation
Grand Total	15.29	20.09	(Rupees Twenty Crores and Nine 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 (BWR) has reaffirmed the ratings at "BWR BB/Stable" and "BWR A4+" for the bank loan facilities amounting Rs 20.09 Crores of Niknam Chemicals Pvt. Ltd..

The rating continues to draw strength from the extensive experience of the promoters, and improving scale of operations. However, the rating is constrained by weak financial risk profile marked by thin profitability margins, high gearing and low networth.

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR expects that the business risk profile of Niknam Chemicals Pvt. Ltd. will be maintained over the medium term. The rating outlook may be revised to 'Positive' in case the company continues to improve its scale of operations and financial risk profile. The rating outlook may be revised to 'Negative' if there is decrease in the revenue generation and deterioration in the financial risk profile of the company.

KEY RATING DRIVERS

Credit Strengths:

Experienced Management :
Mr. Niket Ladha, Mr. Sushil Ladha and Mrs. Indu Ladha are the Directors of the company and manage its day to day operations. The Directors possess vast experience in the same line of business for around 3 decades which has enabled them to understand the intricacies of the business and to establish a strong customer base.
Established customer base :
The company being in the industry for nearly 3 decades has increased the credibility of the firm both domestically and internationally. The company has long standing international customers and the domestic customers include several reputed companies such as Havells India Ltd., Polycab Wires Ltd., KEI Industries Ltd. to name a few.
Moderate Debt Protection Metrics :
The debt protection metrics, ISCR and DSCR remain moderate at 2.33 times and 1.32 times in FY20. The ISCR and DSCR is expected to reduce slightly to 1.79 times and 0.92 times as per FY21 (Prov.) due to slight reduction in revenue due to the impact of Covid 19 pandemic. However the ISCR and DSCR is again expected to improve to 2.34 times and 1.08 times as per FY22 (Projections).

Credit Risks:

Weak financial risk profile :
The company’s risk profile continues to remain weak reflected by low net worth, high gearing and thin profitability. In FY20, the company’s TNW marginally increased to Rs 6.29 Crores. Gearing remains high at 3.59 times in FY20. The company has reported thin profitability margins with OPM at 3.20% and NPM at 0.90% in FY20.
Intense Competition and fragmented nature of the industry :
The chemical industry is highly fragmented and the company faces stiff competition in the industry from several small and large players.
Impact of Covid 19 pandemic :
The company has reported marginally reduced sales in FY21 (Prov.) due to the effect of the Covid 19 pandemic and the restrictions imposed due to it. However with the relaxation of the restrictions and reducing effect of Covid 19 pandemic, the company has been improving sales in FY22.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, Brickwork Ratings has adopted a standalone approach and applied its rating methodology as detailed in the Rating criteria below.

1. General Criteria (link - http://www.brickworkratings.com/download/Criteria-GeneralCriteria.pdf)

2. Approach to Financial Ratios (link - http://www.brickworkratings.com/download/Criteria-FinancialRatios.pdf)

RATING SENSITIVITIES

Going forward, the company’s ability to improve its financial risk profile while increasing its scale of operations would be the key sensitivities over the short to medium term.

Positive : The rating outlook may be revised to positive if the company demonstrates a substantial improvement in its profitability margins, net worth and gearing levels.

Negative : The rating may be downgraded if there is deterioration of the gearing levels, profitability margins and revenue.

LIQUIDITY INDICATORS - Stretched

Liquidity remains stretched although the current ratio is reasonable at 1.31 times as on 31 March 2020. Cash and Bank Balances have improved to Rs 2.47 Crores as on 31 March 2020. The ISCR and DSCR remains moderate at 2.33 times and 1.32 times as on 31 March 2020. Gearing remains high at 3.59 times in FY20 and it is expected to improve to 3.35 times in FY21.Net Cash Accruals of Rs 1.76 Crores is just sufficient to cover the Interest and Finance charges of Rs 1.65 Crores in FY21. Cash Conversion Cycle remains high at 61 days as on 31 March 2021. Cash Credit facility utilization remains moderate at 39.52% for seven months ended October 2021.

ABOUT THE ENTITY

Niknam Chemicals Pvt Ltd (NCPL) was incorporated on 1 December, 1992 and commenced its operations from 1995. NCPL has been engaged in the manufacturing, exporting, and supplying of good quality environment-friendly Flame Retardant Chemicals and Fillers for more than 20 Years and now has acquired the status of the largest manufacturer of a variety of Flame Retardant Chemicals in India. The company has been concentrating on developing new environment-friendly Flame Retardants and Smoke Suppressants in close cooperation with various major industries and research institutes. The company sells its products under the brand name of Niknam. Having been in this industry for the last two decades, the products of the company are readily & regularly accepted and consumed by various major manufacturing industries all across India and the World. The company has advance ACM lines, surface modification line, Micro fine Pulverization Line, drying equipment etc. and a well established complete quality control system for monitoring product quality to ensure the quality consistency of the products which meets the customer’s requirements. Possessing a group of experts of international prestige and long industrial experience, we have established a wide range of markets for our products. The company has a total work force of 107 employees. NCPL has its registered office in New Delhi and has two manufacturing units situated at Bahadurgarh (Haryana) and Vishakhapatnam (Andhra Pradesh) and one newly established unit for trading activity in Mumbai. With Automatic production lines the annual installed production capacity is 25000 Metric Tons of Flame Retardant Chemicals & Fillers and presently the capacity has been utilized up to 24313 MT. Range of products manufactured by the company are as follows : 1) Aluminium Trihydrate (Coated Grades also Available) 2) Aluminium Hydroxide (Precipitated ATH) 3) Magnesium Hydroxide (Coated Grades also Available) 4) Zinc Borate 5) Flamex / FAM- 501(Smoke Suppressant Filler) 6) Flame Guard (One Pack Flame Retardant and Smoke Suppressant) 7) Calcium Borate and 8) Molybdenum Trioxide.

The company imports raw materials from Dubai and China and also procures raw materials domestically and exports manufactured products mainly to Indonesia, Nepal and China. The company has also entered into trading activity recently and has constructed one godown in Mumbai which imports finished goods and supplies them to mainly one customer, Polycab Wires Ltd. The trading godown in Mumbai was constructed in January 2019. The company generates around 3 Crores of sales per annum from trading activity.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	119.74	104.98
EBITDA	Rs.Crs.	3.84	3.72
PAT	Rs.Crs.	1.08	0.88
Tangible Net Worth	Rs.Crs.	6.29	5.22
Total Debt/Tangible Net Worth	Times	3.59	3.72
Current Ratio	Times	1.31	1.20

KEY COVENANTS OF THE FACILITY RATED

Nil

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	9.29	BWR BB/Stable (Reaffirmation)	01Sep2020	BWR BBStable (Assignment)	NA	NA	NA	NA
Fund Based	ST	10.80	BWR A4+ (Reaffirmation)	01Sep2020	BWR A4+ (Assignment)	NA	NA	NA	NA
Grand Total		20.09	(Rupees Twenty Crores and Nine 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
Nimmy Anand Ratings Analyst nimmy.a@brickworkratings.com	Hari Kishan Yadav Associate Director - Ratings hari.ky@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Niknam Chemicals 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	Canara Bank	Term Loan - Sanctioned	0.22	_	0.22
2	SBI Global Factors Limited	Domestic Factoring - Sanctioned	_	10.80	10.80
3	Yes Bank	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	0.84	_	0.84
4	Yes Bank	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	0.42	_	0.42
5	Yes Bank	Term Loan - Sanctioned	0.92	_	0.92
6	Yes Bank	Term Loan - Sanctioned	0.28	_	0.28
7	Yes Bank	Term Loan - Sanctioned	0.80	_	0.80
8	Yes Bank	Term Loan - Sanctioned	0.01	_	0.01
9	Yes Bank	Term Loan - Proposed	1.00	_	1.00
10	Yes Bank	Cash Credit - Sanctioned	2.80	_	2.80
11	Yes Bank	Working Capital Demand Loan - Sanctioned	2.00	_	2.00
Total			9.29	10.80	20.09
TOTAL (Rupees Twenty Crores and Nine lakhs Only)

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