Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 40.00 ACUITE BBB+ | Stable | Reaffirmed -
Bank Loan Ratings 5.00 - ACUITE A2 | Reaffirmed
Total Outstanding 45.00 - -
Total Withdrawn 0.00 - -
 
Rating Rationale

­Acuité has reaffirmed its long-term rating of ‘ACUITE BBB+' (read ACUITE triple B plus) and short-term rating of ‘ACUITE A2’ (read as ACUITE A two) on the Rs.45.00 crore bank facilities of Aries Colorchem Private Limited (ACPL). The outlook is ‘Stable’. 

Rationale for Rating Reaffirmation
The rating reaffirmation reflects AG’s strong financial risk profile marked by healthy net worth, low gearing and heathy debt protection metrics along with its continuing strong liquidity position. Further, it considers established track record of operations of the group and extensive experience of the management in the dye industry. However, the rating is constrained on account of moderation recorded in the revenue and profitability in FY2024. The revenue declined to Rs.245.84 Cr. in FY2024 from Rs. 271.38 Cr. in FY2023 primarily on account of weak demand levels translating into lower volumes and lower price realisations. Further, the operating profit margin declined to 6.48% in FY2024 against 10.42% in FY2023, however improvement in revenue and profitability is expected in FY2025.

Further, the rating remains constrained on account of group’s intensive nature of working capital operations, exposure to intense competition leading to vulnerability in pricing along with regulatory risk.

About the Company
Aries Colorchem Private Limited (ACPL) was incorporated in 2009 by Mr. Kantilal Ishvarlal Patel. Aries Colorchem Private Limited (ACPL) is engaged in manufacturing of dyes and dye intermediates. The manufacturing unit is located at Dahej SEZ in Bharuch (Gujarat). The company derives revenue majorly through exports to Italy, China, Spain, Argentina and others.
 
About the Group
­Gujarat based Aries Group (AG) constitutes of Aries Colorchem Private Limited (ACPL) incorporated in 2009, Aries Organics Private Limited (AOPL) in corporated in 1995 and Aries Dye Chem Industries (ADCI) incorporated in 1980. Aries group is engaged in manufacturing of synthetic organic dyes and dye intermediates. AG mainly exports to manufacturers and traders of textile and leather industries. The group is promoted by Mr. Kantilal Ishvarlal Patel.
 
Unsupported Rating
­Not Applicable
 
Analytical Approach

Extent of Consolidation
•Full Consolidation
Rationale for Consolidation or Parent / Group / Govt. Support
­Acuité has consolidated the business and financial risk profiles of Aries Colorchem Private Limited (ACPL), Aries Organics Private Limited (AOPL) and Aries Dye Chem Industries (ADCI) together referred to as ‘Aries Group’ (AG). The consolidation is in view of the common ownership, similar business models of three companies.
Key Rating Drivers

Strengths
­Experienced management and improving business risk profile
AG is being managed by Mr. Kantilal Ishvarlal Patel, who has extensive experience of more than two decades in the Dye business. Mr. Kantilal Ishvarlal Patel is well supported by second line of generation, Mr. Arish Kantilal Patel. The extensive experience of the promoters has helped AG to establish healthy relations with reputed clientele in international market as well as in local market. Acuité believes that AG’s long operational track record of operations and extensive experience of the management will continue support  AG’s business risk profile over the medium term.
 
Strong financial risk profile
AG’s financial risk profile continued to remain strong albeit marginal deterioration in FY2024 on account of additional debt undertaken during the year and moderation in operating profitability. The group has strong net worth, low gearing and healthy debt protection metrics. AG’s networth stood at Rs. 155.35 Cr. as on March 31, 2024, against Rs.158.38 Cr. as on March 31, 2023. The gearing stood at 0.61 times as on March 31, 2024, against 0.40 times as on March 31, 2023. The TOL/TNW stood at 0.79 times as on March 31, 2024, against 0.53 times as on March 31, 2023. The debt protection metrics moderated yet remained healthy marked by the Interest Coverage Ratio of 8.89 times in FY2024 against 12.59 times in FY2023 and DSCR of 7.27 times in FY2024 against 11.05 times in FY2023. Debt/EBITDA level stood at 5.57 times in FY2024 against 2.19 times in FY2023.

Acuite believes that the financial risk profile of the group will improve over the medium term on account of expected improvement in accruals generation and absence of any major debt funded capex plan.

Weaknesses

­Working capital intensive operations
AG’s working capital operations are intensive in nature marked by high GCA days of 244 days in FY2024 as compared to 187 days in FY2023. The GCA days are mainly dominated by debtor days and inventory days of 130 and 84 in FY2024 against 86 days and 70 days in FY2023 respectively. The debtor’s days are high due to extended credit period being offered to the customers. Further, the group majorly works on cash basis and does not avail longer credit period from its suppliers. The creditors days stood at 47 days in FY2024 as against 30 days in against 57 days in FY2022. However, the bank limit utilization of the group stood moderate for last 6 months ended March 25 at around 39.60%.

Acuite believes that the efficient working capital management will be crucial to the AG in order to maintain a stable credit profile.

Intense competition leading to vulnerability in pricing along with regulatory risk
The group is exposed to intense competition in the industry marked by presence of large number of players. Intense competition limits the pricing flexibility and bargaining power of midsized players such as AG. Furthermore, growth of the dyestuff industry is largely dependent on the end user industries such as textile, Chemicals, leather and paper. AG is regulated by the Gujarat Pollution Control Board with regulations regarding manufacture of products such as acid dyes, reactive dyes and dye intermediates and disposal of waste that are hazardous to the environment. Any adverse change in the regulations could affect the AG’s business risk profile consequently affecting its credit risk profile.
Acuité believes AG’s ability to mitigate such risk and avoid any further deterioration in their operating revenues and profitability margins will remain a key rating monitorable.

Rating Sensitivities
  • Sustained growth in operating revenue while improving its profitability.
  • Any further elongation in working capital cycle leading to deterioration in liquidity position.
 
Liquidity Position
Strong

AG has strong liquidity position marked by healthy generation of cash accruals of Rs. 12.41 Cr. in FY2024 against minimal repayment obligation of Rs.1.27 Cr. during the same period. The cash accruals of the group are estimated to improve further over the medium term, while its repayment obligation will continue to remain nominal during the same period. The group’s working capital operations are intensive marked by high GCA days in FY2024 of 244 days, however, the reliance on working capital limits stood moderate with average utilisation of ~39.60% over the past 6 months ending March 2025. The group maintained unencumbered cash and bank balances of Rs.3.21 Cr. and the current ratio stood healthy at 3.48 times as on March 31, 2024, respectively.

Acuite believes that the liquidity of the group is likely to remain strong over the medium term on account of expected improvement in cash accruals generation against nominal repayment obligations and buffer available from the moderately utilised working capital limits
 
Outlook: Stable
­
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 24 (Actual) FY 23 (Actual)
Operating Income Rs. Cr. 245.84 271.38
PAT Rs. Cr. 2.90 14.66
PAT Margin (%) 1.18 5.40
Total Debt/Tangible Net Worth Times 0.61 0.40
PBDIT/Interest Times 8.89 12.59
Status of non-cooperation with previous CRA (if applicable)
­Not Applicable
 
Interaction with Audit Committee anytime in the last 12 months (applicable for rated-listed / proposed to be listed debt securities being reviewed by Acuite)
Not applicable
Any Other Information
­None
 
Applicable Criteria
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm
• Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm
• Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm
• Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm
Note on complexity levels of the rated instrument

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
30 Jan 2024 Letter of Credit Short Term 5.00 ACUITE A2 (Downgraded from ACUITE A2+)
PC/PCFC Long Term 31.90 ACUITE BBB+ | Stable (Downgraded from ACUITE A- | Stable)
Term Loan Long Term 0.73 ACUITE BBB+ | Stable (Downgraded from ACUITE A- | Stable)
Proposed Long Term Bank Facility Long Term 7.37 ACUITE BBB+ | Stable (Downgraded from ACUITE A- | Stable)
02 Nov 2022 PC/PCFC Long Term 31.90 ACUITE A- | Stable (Reaffirmed)
Term Loan Long Term 0.73 ACUITE A- | Stable (Reaffirmed)
Proposed Long Term Bank Facility Long Term 7.37 ACUITE A- | Stable (Reaffirmed)
Letter of Credit Short Term 5.00 ACUITE A2+ (Reaffirmed)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum
(Rs. Cr.)		 Complexity Level Rating
State Bank of India Not avl. / Not appl. Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 5.00 Simple ACUITE A2 | Reaffirmed
State Bank of India Not avl. / Not appl. PC/PCFC Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 31.90 Simple ACUITE BBB+ | Stable | Reaffirmed
State Bank of India Not avl. / Not appl. Term Loan 01 Sep 2024 Not avl. / Not appl. 31 Oct 2030 8.10 Simple ACUITE BBB+ | Stable | Reaffirmed
*Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support)
S. No. Company Name
1 Aries Colorchem Private Limited
2 Aries Dye Chem Industries 
3 Aries Organics Private Limited
­
 

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