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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 10.00 | - | ACUITE A3 | Assigned |
| Bank Loan Ratings | 91.15 | ACUITE BBB- | Stable | Assigned | - |
| Total Outstanding Quantum (Rs. Cr) | 101.15 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
| Acuité has assigned the long term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus ) and short term rating of ‘ACUITE A3’ (read as ACUITE A three) to the Rs.101.15 crore bank facilities of LAKSHMI FLOAT GLASS LIMITED (LFGL). The outlook is ‘Stable’. |
| About the Company |
| LFGL, promoted by the Delhi-based Gupta family, was established as a partnership firm, Lakshmi Traders, in 1970, and was reconstituted as a private limited company in 1992, and later as a closely held public limited company. The company is engaged in trading of float glass. Its operations are managed by third generation entrepreneur, Mr Amit Gupta, and his uncle Mr Lakshmi Narain Agarwal. |
| Analytical Approach |
| Acuité has considered the standalone financial and business risk profile of LFGL to arrive at the rating. |
Key Rating Drivers
| Strengths |
| Experienced management
LFGL was incorporated in 1970 and the company is currently managed by Ashok Kumar Gupta and Mr L.N Aggarwal who have experience of over four decades in the glass and glassware industry. The extensive experience has enabled the company forge healthy relationships with customers and suppliers. LFGL has wide customer base and is the sole distributor for Asahi India Glass Ltd (AIG) in North India. Further, the experience of the top management and second level management, company has been able to expand its business pan India. Acuité believes that LFGL will continue to benefit from its experienced management and established relationships with customers and suppliers. Moderate financial risk profile Financial risk profile of the company is moderate marked by moderate net worth, low gearing and moderate debt protection metrics. The net worth of the company stood at Rs. 59.26 Crore as on 31 March 2022(Prov.) as against Rs. 53.50 Crore as on 31 March 2021. The gearing level (debt-equity) stood improved at 0.93 times as on 31 March 2022(Prov.) as against 1.32 times as on 31 March 2021. The total debt of the company is Rs. 55.40 Crore as on 31 March 2022 which consists of long term debt of Rs.34.83 Crore, current portion of long term debt of Rs. 6.51 Cr and working capital borrowings of Rs.14.06 Crore. Coverage ratios stood moderate as evident from interest coverage ratio (ICR) of 2.61 times in FY2022(Prov.) as against 2.10 times in FY2021. Further, debt servicing coverage ratio stood at 1.41 times for FY2022(Prov.) as against 1.35 times for FY2021. NCA/TD (Net Cash Accruals to Total Debt) ratio stood at 0.12 times in FY2022(Prov.). However, Debt to EBITDA stood high at 4.07 times in FY2022(Prov.). |
| Weaknesses |
| Intensive working capital requirements LFGL has intensive working capital requirements as evident from Gross Current Assets (GCA) days of 140 days for FY2022(Prov.). However, GCA days improved from 202 days for FY2021. GCA days have improved on account of better realization from debtors. Debtor days stood improved at 72 days for FY2022(Prov.) as against 101days for FY2021. Further, inventory days stood improved at 34 days for FY2022(Prov.) as against 35 days for FY2021. Further, current ratio stood high at 2.23 times as on 31st March 2022(Prov.). Highly fragmented and competitive industry The glass and glassware industry is highly fragmented with several organized and unorganized players, thereby impacting the company's profitability. Acuité believes that high fragmentation and competition is likely to impact the profitability Exposed to volatility in fuel and raw material costs With glass manufacturing being an energy-intensive process, the company’s profitability is highly exposed to volatility in fuel and raw material prices. Additionally, silica sand, soda ash and dolomite account for 70% of the total raw material costs and the company’s profitability is sensitive to availability from proximity and the fluctuations in prices of these raw materials. |
| Rating Sensitivities |
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>Deterioration in financial risk profile of the company >Deterioration in scale of operations and profitability margins. |
| Material covenants |
| None. |
| Liquidity Position |
| Adequate |
| LFGL has adequate liquidity marked by adequate net cash accruals to its maturing debt obligations. The company generated cash accruals of Rs. 6.76 Cr. in FY2022(Prov.) as against debt repayment obligation of Rs. 3.27 Cr for the year. The cash accruals of the company are estimated to remain in the range of around Rs.7.98 Crore to Rs. 9.49 Crore during FY23-24 as against repayment obligation of around Rs. 5.96 Cr to 5.23 Cr for the same period. The company’s working capital operations are intensive marked by gross current asset (GCA) days of 140 days. However, the fund based bank limits were only utilized at an average of 27.73 percent for last 8 months ending April 2022.Further, the company maintains unencumbered cash and bank balances of only Rs.0.15 Crore as on 31 March 2022(Prov.). The current ratio stands at 2.23 times as on 31 March 2022(Prov.). |
| Outlook: Stable |
| Acuité believes that LFGL will maintain a ‘Stable’ outlook over the medium term from the industry experience of its promoters. The outlook may be revised to 'Positive' if there is substantial and sustained improvement in LFGL's operating income or profitability, while maintaining its working capital cycle. Conversely, the outlook may be revised to 'Negative' in case of weakening of its capital structure and debt protection metrics. |
| Particulars | Unit | FY 22 (Provisional) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 265.07 | 183.79 |
| PAT | Rs. Cr. | 5.76 | 4.00 |
| PAT Margin | (%) | 2.17 | 2.17 |
| Total Debt/Tangible Net Worth | Times | 0.93 | 1.32 |
| PBDIT/Interest | Times | 2.61 | 2.10 |
| Status of non-cooperation with previous CRA (if applicable) |
| Brickwork vide its press release dated 23 June 2022, has mentioned the rating of LFGL to ‘[BWR]BB’ Issuer Not Cooperating as on 23 June 2022. |
| Any other information |
| None. |
| Applicable Criteria |
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• Default Recognition - https://www.acuite.in/view-rating-criteria-52.htm • Trading Entitie: https://www.acuite.in/view-rating-criteria-61.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
| https://www.acuite.in/view-rating-criteria-55.htm |
| Rating History : |
| Not applicable |
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