PR

Press Release
APL METALS LIMITED
December 29, 2022
Rating Assigned and Downgraded

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	30.00	ACUITE BB+ \| Stable \| Assigned	-
Bank Loan Ratings	87.00	ACUITE BB+ \| Stable \| Downgraded	-
Total Outstanding Quantum (Rs. Cr)	117.00	-	-
Total Withdrawn Quantum (Rs. Cr)	0.00	-	-

Rating Rationale

Acuité has downgraded the long term rating to ‘ACUITE BB+’ (read as ACUITE double B plus) from Acuite BBB- (Read as Acuite Triple B Minus) on the Rs.87.00 crore bank facilities of APL Metals Limited.
Acuité has also assigned the long term rating of ‘ACUITE BB+’ (read as ACUITE double B plus) on the Rs.30.00 crore bank facilities of APL Metals Limited.
The outlook is ‘Stable’.

Rationale for the rating
The rating downgrade is on account of continuous deterioration in financial risk profile of the company marked by high leverage, moderate debt protection metrics and modest networth during FY2022. The rating downgrade is also on account of deterioration in operating profitability margin during FY2022 over FY2021 which has remained subdued during 6MFY2023 as well. The ratings, however, continue to favorably factor in the long experience of the promoters in lead business, established track record and healthy scale of operation.

About the Company

APL Metals Limited (APL), formerly known as Associated Pigments Limited, is a Kolkata based company, established in 1948 and commercial operations having begun in 1955. It is listed in Calcutta Stock Exchange Limited (CSE). APL is engaged in the manufacturing of refined lead, lead alloys and lead oxides with the combined installed capacity of 127730 MTPA, which are used in manufacturing of batteries, rolled extrusions, pigments used in paints, cable sheathing, among others.

Analytical Approach

Acuité has considered the standalone business and financial risk profile of APL while arriving
at the rating

Key Rating Drivers

Strengths

Long track record of operations and experienced management
The company has a long operational track record in the lead industry for more than 60 years. AML’s board of directors comprise of Shri Sanjiv Nandan Sahaya as the Chairman and Managing Director, Mr. Raghav Bajoria, Mr. Prakash Kumar Damani and Mr. Rahul Damani as the other directors in the board with an experience of nearly two decades. Acuité believes that the long operational track record of AML along with the long experience of the management will continue to benefit the company going forward, resulting in steady growth in the scale of operations.

Healthy scale of operation
The revenue of the company stood healthy at Rs.724.64 crore in FY2022 as compared to Rs.633.29 crore in the previous year. Further, the company has reported revenues of Rs.420.70 crore till 30^th September 2022 (Prov.). The growth in sales during FY2022 over FY2021 is attributable to better realization though there has been a decrease in volume sales during the same period. Acuité believes the revenue of the company will increase going forward based on the steady demand for refined lead, lead alloys and lead oxides in the global market.

Comfortable working capital management
The working capital management of the company is marked by comfortable gross current asset (GCA) days of 86 days in FY2022 as compared to 88 days in FY2021. The debtor days of the company stood comfortable at 02 days in FY2022 as compared to 01 days in the previous year. The inventory days of the company stood comfortable at 79 days in FY2022 as compared to 83 days in the previous year. Acuité believes that the ability of the company to manage its working capital operations efficiently will remain a key rating sensitivity.

Weaknesses

Volatile profitability margin
The operating profitability margin of the company has declined and stood moderate at 3.05 per cent in FY2022 as compared to 4.09 per cent in the previous year. This deterioration in operating profitability is on account of increase in raw material cost and power cost during the period. Further, the operating profitability stood moderate 3.30 per cent till 30th Sept 2022 (Prov.). Going forward, Acuite believes, that the profitability margin of the company will remain at moderate levels over the medium term backed by overall moderation in realization.

Moderate financial risk profile
The financial risk profile of the company is marked by modest net worth, high gearing and comfortable debt protection metrics. The net worth of the company stood modest at Rs.31.90 crore in FY 2022 as compared to Rs 33.38 crore in FY2021. The total networth of company includes RS.7.31crore of unsecured loan termed as quasi equity in FY2022 as the same amount is subordinated to bank debt. The gearing of the company deteriorated to 4.14 times as on March 31, 2022 when compared to 2.61 times as on March 31, 2021. The increase in gearing is mainly on account of increase in short term debt and long-term debt during the period. Interest coverage ratio (ICR) is comfortable and stood at 1.58 times in FY2022 as against 1.70 times in FY2021. The debt service coverage ratio (DSCR) of the company also stood moderate at 1.22 times in FY2022 as compared to 1.40 times in the previous year. The net cash accruals to total debt (NCA/TD) declined to 0.05 times in FY2022 as compared to 0.09 times in the previous year. Going forward, Acuite believes the financial risk profile of the company will remain moderate on account of steady net cash accruals and no major debt funded capex plan over the near term.

Customer concentration risk
More than 70-80% of the revenues of AML is attributable to the sales made to Exide Industries Limited. However, the company benefits with the association of this reputed client for more than 50 years, and supporting the company to garner repeat orders. Acuite believes that going forward the company would continue to benefit with its association with Exide Industries Limited and simultaneosly increase its export sales, thereby reducing the customer concentration risk to some extent.

Susceptible to the volatility in the raw material prices and government regulation
AML’s main raw material i.e, lead, exhibits high volatility in terms of price. However, this risk is mitigated by the company’s ability to simultaneously procure the raw materials as and when the order for sales is received. Moreover, the lead metal industry is also susceptible to the changes in government policies and environmental norms. Any non-compliance with the prevailing regulations and norms, could affect the operations of the company.

Rating Sensitivities

Growth in revenue along with improvement in profitability margins
Further deterioration in capital structure
Deterioration in the working capital cycle leading to stressed liquidity position

Material covenants

None

Liquidity Position

Adequate

The company has adequate liquidity position marked by comfortable net cash accruals of Rs.6.41 crore as against Rs.2.70 term debt obligations in FY2022. The cash accruals of the company are estimated to remain in the range of around Rs. 6.82 crore to Rs. 9.58 crore during 2023-24 as against of Rs.6.02 crore long term debt obligations during FY2023 and in FY2024 respectively. The current ratio of the company stood moderate at 1.37 times in FY2022. The Gross Current Asset (GCA) days of the company stood comfortable at 86 days in FY2022. The bank limit of the company has been ~75 percent utilized during the last six months ended November 2022. Acuité believes that the liquidity of the company is likely to remain adequate over the medium term on account of healthy cash accruals against the long debt repayments over the medium term.

Outlook:Stable

Acuité believes that APL will maintain a 'Stable' outlook and continue to benefit over the medium term from the extensive experience of its promoters. The outlook may be revised to 'Positive' in case of improvement in their profitability and capital structure. Conversely, the outlook may be revised to 'Negative' in case of decline in revenue and profitability or further rise in debt levels thus impacting the leverage ratios.

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 22 (Actual)	FY 21 (Actual)
Operating Income	Rs. Cr.	724.64	633.29
PAT	Rs. Cr.	4.96	6.72
PAT Margin	(%)	0.68	1.06
Total Debt/Tangible Net Worth	Times	4.14	2.61
PBDIT/Interest	Times	1.58	1.70

Status of non-cooperation with previous CRA (if applicable)

None

Any other information

None

Applicable Criteria

• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm
• Entities In Manufacturing Sector:- https://www.acuite.in/view-rating-criteria-59.htm
• Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.htm
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm

Note on complexity levels of the rated instrument

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.

Rating History

Date	Name of Instruments/Facilities	Term	Amount (Rs. Cr)	Rating/Outlook
18 Oct 2021	Letter of Credit	Long Term	33.00	ACUITE BBB- \| Stable (Upgraded from ACUITE BB+ \| Stable)
	Cash Credit	Long Term	24.00	ACUITE BBB- \| Stable (Upgraded from ACUITE BB+ \| Stable)
	Bills Discounting	Long Term	30.00	ACUITE BBB- \| Stable (Upgraded from ACUITE BB+ \| Stable)
19 Aug 2020	Bills Discounting	Long Term	30.00	ACUITE BB+ \| Stable (Upgraded from ACUITE BB )
	Letter of Credit	Long Term	33.00	ACUITE BB+ \| Stable (Upgraded from ACUITE BB )
	Cash Credit	Long Term	24.00	ACUITE BB+ \| Stable (Upgraded from ACUITE BB )
19 Jun 2020	Bills Discounting	Long Term	30.00	ACUITE BB (Downgraded and Issuer not co-operating*)
	Letter of Credit	Long Term	33.00	ACUITE BB (Downgraded and Issuer not co-operating*)
	Cash Credit	Long Term	24.00	ACUITE BB (Downgraded and Issuer not co-operating*)
11 Apr 2019	Letter of Credit	Long Term	33.00	ACUITE BB+ \| Stable (Assigned)
	Cash Credit	Long Term	24.00	ACUITE BB+ \| Stable (Reaffirmed)
	Bills Discounting	Long Term	30.00	ACUITE BB+ \| Stable (Assigned)
22 Mar 2019	Cash Credit	Long Term	10.00	ACUITE BB+ \| Stable (Assigned)

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
Indian Bank	Not Applicable	Bills Discounting	Not Applicable	Not Applicable	Not Applicable	30.00	Simple	ACUITE BB+ \| Stable \| Downgraded
Indian Bank	Not Applicable	Cash Credit	Not Applicable	Not Applicable	Not Applicable	24.00	Simple	ACUITE BB+ \| Stable \| Downgraded
Axis Bank	Not Applicable	Cash Credit	Not Applicable	Not Applicable	Not Applicable	15.00	Simple	ACUITE BB+ \| Stable \| Assigned
Indian Bank	Not Applicable	Letter of Credit	Not Applicable	Not Applicable	Not Applicable	33.00	Simple	ACUITE BB+ \| Stable \| Downgraded
Axis Bank	Not Applicable	Letter of Credit	Not Applicable	Not Applicable	Not Applicable	15.00	Simple	ACUITE BB+ \| Stable \| Assigned

Contacts

Analytical	Rating Desk
Pooja Ghosh Vice President-Rating Operations Tel: 022-49294041 pooja.ghosh@acuite.in Abhishek Dey Senior Analyst-Rating Operations Tel: 022-49294065 abhishek.dey@acuite.in	Varsha Bist Senior Manager-Rating Operations Tel: 022-49294011 rating.desk@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai.

Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité.