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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 18.08 | ACUITE BB- | Stable | Upgraded | - |
| Bank Loan Ratings | 3.92 | - | ACUITE A4 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 22.00 | - | - |
| Rating Rationale |
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Acuité has upgraded the long-term rating to ‘ACUITE BB-’ (read as ACUITE double B minus) from ‘ACUITE B’ (read as ACUITE B) and reaffirmed the short-term rating of 'ACUITE A4' (read as ACUITE A four) on the Rs. 22.00 crore bank facilities of Aimengineers India Private Limited (AEIPL). The outlook is 'Stable'.
Rationale for rating upgrade The rating upgrade of AEIPL takes into account stable operating income generated by the company during FY2023 and FY2022 with improved profitability margins during FY2023 as against FY2022. It also draws comfort from company’s experienced management with an established track record of operations, increase in the order values and improved liquidity position marked by adequate net cash accruals (NCA) to its maturing debt obligations. The rating is however constrained by the company’s below average financial risk profile and working capital-intensive operations. Going forward, ability of the company to improve its scale of operations and maintain profitability margins along with improving its financial risk profile, while improving and maintaining an efficient working capital cycle will remain a key rating sensitivity factor. |
| About the Company |
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AEIPL incorporated in 2008 as a partnership firm which was later converted into a private limited company in 2018, is engaged in the manufacturing of stainless steel and carbon steel equipments required for chemical, food, mining and construction industries. The company currently has its factory in Chakan, Pune with a production capacity of 200 tonnes per month.
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| Analytical Approach |
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Acuité has considered the standalone view of the business and financial risk profile of AEIPL to arrive at the rating.
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Key Rating Drivers
| Strengths |
| Experienced management and established track record of operations
AEIPL has an operational track record of over a decade in manufacturing stainless steel and carbon steel equipments. The company is promoted by its directors Mr. Abbasali Abdulgani Choudhary, Mr. Mohammad Abdulgani Choudhary and Mr. Mahiboobali Abdulgani Choudhary. The directors possess an extensive experience of over two decades in the steel industry and are supported by its team of experienced professionals in managing day to day operations of AEIPL. The extensive experience of the management has enabled AEIPL to establish a healthy relationship with its customers and suppliers. Acuité believes that AEIPL will continue to benefit from its experienced management and established track record of operations. Stable operating income albeit improved profitability
AEIPL generated revenue of Rs.39.97 Cr during FY2023 as against Rs.39.76 Cr during FY2022. The company achieved this marginal improvement based on the stable orders of ~Rs.40 Cr received over the last two years towards manufacturing of various equipments for its clienteles across various sectors such as defence, mining, chemical, food and beverages amongst others. Despite of recording marginal growth in the operating income during FY2023, the company’s operating and net profitability margin however stood improved at 16.40 percent and 4.93 percent respectively in FY2023 as against 10.72 percent and 0.03 percent respectively last year on account of reduced steel prices. Prices of MS steel plates, which is a key raw material been used by the company in manufacturing the equipments had surged significantly in last year, which got stabilised in FY2023. For the current year FY2024, company has received orders worth Rs.60 Cr and are further expecting additional orders worth Rs.15 Cr to Rs.20 Cr by Q3 FY2024. The orders are expected to be executed during FY2024 which provides adequate revenue visibility in near to medium term. Apart from this, company is also undertaking capex to increase its existing production capacity of 200 tonnes per month to 350 tonnes per month by installing additional machineries which are expected to be operational by Q3 FY2024. Acuité believes that ability of AEIPL to improve its scale of operations and maintain profitability margins will remain a key rating sensitivity factor. |
| Weaknesses |
| Below average financial risk profile
Financial risk profile of AEIPL is below average marked by modest networth, moderate gearing and average debt protection metrics. The networth of the company stood improved albeit remained modest at Rs.8 Cr as on 31 March, 2023 as against Rs.5 Cr as on 31 March, 2022. There has been an equity infusion of Rs.1.44 Cr during FY2023. The gearing (debt-equity) stood improved at 2.19 times as on 31 March, 2023 as against 4.12 times as on 31 March, 2022. The gearing of the company is expected to improve and remain moderate over the medium-term despite of increase in the debt levels upon undertaking debt funded capex of installing new machineries to increase the production capacity. The total debt of Rs.18 Cr as on 31 March, 2023 consists of long term bank borrowings of Rs.12 Cr and short term bank borrowings of Rs.6 Cr. The interest coverage ratio and DSCR stood improved at 2.86 times and 1.40 times for FY2023 as against 1.86 times and 0.78 times for FY2022. The Net Cash Accruals to Total debt stood improved at 0.21 times for FY2023 as against 0.10 times for FY2022. The Total outside liabilities to Tangible net worth stood improved albeit remained high at 3.18 times for FY2023 as against 5.40 times for FY2022. The Debt-EBITDA ratio stood improved albeit remained high at 2.72 times for FY2023 as against 4.55 times for FY2022. Acuité believes that ability of AEIPL to improve its financial risk profile over the medium term will remain a key rating sensitivity factor. Working capital intensive operations The working capital operations of AEIPL are intensive marked by its Gross Current Assets (GCA) of 131 days for FY2023 which stood at similar levels of FY2022. The inventory cycle of the company stood elongated at 121 days for FY2023 as against 97 days for FY2022 whereas the receivables cycle stood at 12 days for FY2023 as against 15 days for FY2022. The operations of the company are project based and the gestation period is around six months due to which the work in progress inventory of the company is usually high. This makes the company dependent on bank borrowings for its working capital requirement and therefore the average bank limit utilization for 6 months’ period ended June 2023 stood high at ~94 percent. Further, the creditors cycle of the company stood at 58 days in FY2023 as against 47 days in FY2022. Acuité believes that the ability of AEIPL to improve and maintain an efficient working capital cycle over the medium term will remain a key rating sensitivity factor. |
| Rating Sensitivities |
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| Material covenants |
| None |
| Liquidity Position - Adequate |
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AEIPL has adequate liquidity position marked by sufficient net cash accruals (NCA) to its maturing debt obligations. The company generated cash accruals in the range of Rs.1 Cr to Rs.4 Cr during FY2021 to FY2023 against its debt repayment obligation in the range of Rs.1 Cr to Rs.3 Cr during the same period. Going forward, the NCA are expected in the range of Rs.6 Cr to Rs.7 Cr for the period FY2024-FY2025 against its debt repayment obligation in the range of Rs.2 Cr to Rs.3 Cr during the same period. The working capital operations of the company are however intensive marked by its gross current asset (GCA) days of 131 days for FY2023. This makes the company dependent on bank borrowings for its working capital requirement and therefore the average bank limit utilization for 6 months’ period ended June 2023 stood high at ~94 percent. Current ratio stands at 0.98 times as on 31 March 2023. The company has maintained cash & bank balance of Rs.0.09 Cr in FY2023.
Acuité believes that liquidity of AEIPL is likely to remain adequate over the medium term on account of sufficient cash accruals against its maturing debt obligations. |
| Outlook: Stable |
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Acuité believes that AEIPL will maintain 'Stable' outlook over the medium term on account of its experienced management with an established track record of operations. The outlook may be revised to 'Positive' in case of significant and sustained growth in revenue and profitability while effectively managing its working capital cycle and keeping the debt levels moderate. Conversely, the outlook may be revised to 'Negative' in case of lower than expected growth in revenue or deterioration in the financial and liquidity profile most likely as a result of higher than envisaged working capital requirements.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 39.97 | 39.76 |
| PAT | Rs. Cr. | 1.97 | 0.01 |
| PAT Margin | (%) | 4.93 | 0.03 |
| Total Debt/Tangible Net Worth | Times | 2.19 | 4.12 |
| PBDIT/Interest | Times | 2.86 | 1.86 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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