Press Release December 13, 2024 ARJUN ENTERPRISES PRIVATE LIMITED Rating Upgraded

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	18.00	ACUITE BB | Stable | Upgraded	-
Bank Loan Ratings	18.00	-	ACUITE A4+ | Upgraded
Total Outstanding	36.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

­­Acuité has upgraded its long term rating to ‘ACUITE BB’ (read as ACUITE double B) from ‘ACUITE BB-’ (read as ACUITE double B minus)  and short term rating to ‘ACUITE A4+’ (read as ACUITE A four plus) from ‘ACUITE A4’ (read as ACUITE A four) for Rs.36.00 Cr. bank loan facility of Arjun Enterprises Private Limited (AEPL). The outlook remains ‘Stable’. Rationale for Upgrade The rating reflects the longstanding operational experience and the proven track record of its management in the copper industry. The company has demonstrated steady growth in operating income, driven by improved realizations and increased volume of sales. AEPL has effectively enhanced its operating margins, primarily due to improved logistics management and a reduction in transportation costs. These factors have contributed to a more efficient operational structure, although the PAT margin remains stable.  The company's financial risk profile continues to be characterized as average, with moderate growth in net worth and moderate capital structure while the company has maintained quasi-equity in its capital structure. AEPL's liquidity position remains stretched, marked by net cash accruals of Rs. 1.14 Cr. in FY24 compared to debt obligations of Rs. 1.54 Cr. for the same period. The company has been able to meet its debt obligations using USL brought in by the management, but liquidity remains a concern.

About the Company

Mumbai – Based, Arjun Enterprises Private Limited was incorporated in 2008 by Mr. Anil Anand, Mr. Ashish Anand, and Ms. Soumya Khetrapal. Directors are Mr. Anil Anand and Mr. Arjun. The company is engaged in the business of import and export of copper wired scrap and trading of copper wire and allied products in the domestic market.

Unsupported Rating

­Not Applicable

Analytical Approach

­Acuité has considered the standalone business and financial risk profile of AEPL to arrive at this rating

Key Rating Drivers

Strengths

­Experienced management AEPL was incorporated in 2008. The promoters have over a decade of experience in copper industry. They are supported by other key managerial personnel who are professionally running the company. Acuité believes that the company will benefit from its experienced management to maintain healthy relations with its customers and suppliers. Increase in scale of operations AEPL’s operating income stood at Rs.500.85 Cr. in FY24 as against Rs. 343.89 Cr. in FY23. Further, the company has booked ~Rs. 315 Cr. till October 2024. Increase in revenue is on account of increase in volume sold and better realizations. The EBITDA margin improved to 1.07 percent in FY24 from 0.50 percent in FY2023. The increase is because of improvement in logistics and reduction in transportation costs. The PAT margin stood at 0.23 percent in FY24 as against 0.20 percent in FY23. Acuite believes that the scale of operations will improve and margins will remain on similar levels over the medium term. Efficient working capital management AEPL has efficient working capital requirements as evident from Gross Current Days (GCA) days of 79 days for FY24 as against 99 days for FY2023. Debtor days decreased to 34 days in FY2024 as against 53 days in FY2023. The credit terms vary with relationship of customers but generally it is up to 90 days. In both FY2024 and FY2023, inventory days remained consistent at 42 days. The company experiences extended lead times in the procurement of raw materials due to the poor condition of the roads between Delhi and Mumbai. As a result, it is necessary for the company to maintain adequate stock levels. The company has other current assets amounting to Rs. 1.89 crore, which are lien marked FDRs, short-term loans and advances of Rs.1.00 Cr. and advances to suppliers of Rs. 0.49 Cr. Creditor days of the company stood at 37 days in FY24 as against 36 days as on FY2023. The company provides a credit period up to 90 days backed by letter of credit.  Acuite believes that the working capital operations of the company will remain at the similar levels over the medium term. Average Financial Risk Profile The financial risk profile of the company remained average marked by moderate growth in networth, comfortable gearing and low debt protection metrics. The networth of the company stood at Rs.26.46 Cr. in FY24 as against Rs.24.89 Cr. in FY23 due to accretion of reserves. Acuite has considered Rs.10.15 Cr. as a part of quasi-equity because the management has undertaken to maintain this amount in the business over the medium term. The gearing stood at 1.19 times in FY24 as against 1.45 times in FY23. The debt protection metrices of the company is low marked by Interest coverage ratio (ICR) of 1.38 times and debt service coverage ratio (DSCR) of 0.93 times for FY2024. TOL/TNW stood at 3.13 times in FY24 as against 2.82 times in FY23. The net cash accruals to total debt (NCA/TD) stood healthy at 0.04 times in FY2024. Acuite believes that the financial risk profile will remain average over the medium term, supported by steady accruals and moderate capital structure.

Weaknesses

­Susceptible to fluctuations in prices of raw material and forex rates The major raw material of the company is copper scrap. The company’s performance remains vulnerable to cyclicality in the copper sector as demand for copper depends on the performance of the end user. Moreover, the prices of the same are fluctuating in nature, therefore the operating profit margins of the company is susceptible to raw material price fluctuation.

Rating Sensitivities

­­Movement in the scale of operations and profitability Improvement in coverage indicators

Liquidity Position

Stretched

AEPL has stretched liquidity marked by net cash accruals of Rs. 1.14 Cr. in FY24 as against debt obligation of Rs.1.54 Cr. over the same period. The company has brought in unsecured loans in the business to meet debt repayment obligations. The cash and bank balance stood at Rs. 0.35 Cr. for FY 2024. The company maintains unencumbered fixed deposits of Rs1.00 Cr. in FY24. Further, the current ratio of the company stood moderate at 1.38 times in FY2024 as against 1.46 times in FY23. The working capital cycle of the company is marked by Gross Current Assets (GCA) of 79 days for FY2024 as against 99 days for FY2023. The bank limit of the company has been ~ 98 percent for fund based and 44 percent for non-fund based utilized for the last eight months ended in November 2024. Acuite believes that the liquidity of the company is likely to remain improve over the medium term on account of steady cash accruals against lower debt obligations and moderate current ratio over the medium term.

Outlook: Stable

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Other Factors affecting Rating

­None

Key Financials

Particulars	Unit	FY 24 (Actual)	FY 23 (Actual)
Operating Income	Rs. Cr.	500.85	343.89
PAT	Rs. Cr.	1.13	0.69
PAT Margin	(%)	0.23	0.20
Total Debt/Tangible Net Worth	Times	1.19	1.45
PBDIT/Interest	Times	1.38	1.94

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

­Not Applicable

Any other information

­None

Applicable Criteria

• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Trading Entities: https://www.acuite.in/view-rating-criteria-61.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 15 Sep 2023 Letter of Credit Short Term 9.00 ACUITE A4 (Reaffirmed) Letter of Credit Short Term 9.00 ACUITE A4 (Reaffirmed) Cash Credit Long Term 10.00 ACUITE BB- | Stable (Reaffirmed) Cash Credit Long Term 8.00 ACUITE BB- | Stable (Reaffirmed) 22 Jun 2022 Letter of Credit Short Term 9.00 ACUITE A4 (Reaffirmed) Letter of Credit Short Term 9.00 ACUITE A4 (Reaffirmed) Cash Credit Long Term 8.00 ACUITE BB- | Stable (Reaffirmed) Cash Credit Long Term 10.00 ACUITE BB- | Stable (Reaffirmed)

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Annexure - Details of instruments rated

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. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 10.00 Simple ACUITE BB | Stable | Upgraded ( from ACUITE BB- ) Canara Bank Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 8.00 Simple ACUITE BB | Stable | Upgraded ( from ACUITE BB- ) State Bank of India Not avl. / Not appl. Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 5.50 Simple ACUITE A4+ | Upgraded ( from ACUITE A4 ) Canara Bank Not avl. / Not appl. Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 9.00 Simple ACUITE A4+ | Upgraded ( from ACUITE A4 ) Not Applicable Not avl. / Not appl. Proposed Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 3.50 Simple ACUITE A4+ | Upgraded ( from ACUITE A4 )

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Contacts

Mohit Jain Senior Vice President - Rating Operations Manvi Khaitan Associate Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@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. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating. Note: None of the Directors on the Board of Acuité Ratings & Research Limited are members of any rating committee and therefore do not participate in discussions regarding the rating of any entity.