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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 16.31 | ACUITE BBB- | Stable | Upgraded | - |
| Bank Loan Ratings | 2.69 | - | ACUITE A3 | Upgraded |
| Total Outstanding | 19.00 | - | - |
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Rating Rationale |
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Acuite has upgraded the long-term rating to 'ACUITE BBB-' (read as ACUITE triple B minus) from 'ACUITE BB' (read as ACUITE double B) on Rs. 16.31 Cr. bank facility and upgraded the short-term rating to 'ACUITE A3' (read as ACUITE A three) from 'ACUITE A4+' (read as ACUITE A four plus) on Rs.2.69 Cr. bank facility of ARMOUR DISPLAY SYSTEMS PRIVATE LIMITED. The outlook is 'Stable'.
Rationale for upgrade The rating upgrade takes into cognizance the healthy business and financial risk profile of the company driven by increase in revenues, stable profitability margins, improving working capital cycle and improved interest coverage and debt service coverage ratios. The revenues of the company stood at Rs.48.03 crores in FY23 as against a revenue of Rs.27.84 crores in FY22, a growth of 72.49% in revenues. Although the operating margins and PAT margins have declined to 29.11% in FY23 from 36.82% in FY22 and to 18.14% in FY23 from 25.32% in FY22, the margins remain at a healthy level. The rating also factors in the improvement in Interest Coverage Ratio (ICR) and Debt Service Coverage Ratio (DSCR). The ICR and DSCR has improved to 12.54 times in FY23 from 7.09 times in FY22 and to 5.65 times in FY23 from 5.23 times in FY22 respectively. ADSPL’s rating also considers the improved gearing ratio to 0.27 in FY23 from 0.59 in FY22. The company’s current ratio remains healthy at 2.62 times in FY23 signifying adequate liquidity position to meet its debt repayments. The liquidity is also seen in the fund-based utilisation of 69.38% for the seven-month period ended November 2023. The rating assigned also factors in the long-term operational track record of the company and the extensive experience of the promoters in this industry. |
| About the Company |
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Armour Display Systems Private Limited is a techno-based, dynamic, Out of the Home (OOH) communication technology organization, incorporated in 2004. ADSPL is engaged in providing outdoor advertising solutions. The company works on a Public Private Partnership (PPP) model with the Indian Railways, in which the Railways provide live train running information and other awareness messages through the audio and visual sources provided by ADSPL. The company has been creating digital campaigns for different brands in DOOH space for more than 14 years now. The company caters to the railways in various locations, including New Delhi, Maharashtra, Rajasthan, Uttar Pradesh, Gujarat, and others. Mrs. Namrata Hirani and Mr. Pankaj Kumar Srivastava are the current directors of the company and have an experience of around a decade in managing the operations of the company.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered the standalone financial and business risk profile of the ADSPL to arrive at the rating.
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| Key Rating Drivers |
| Strengths |
| Long operational track record of the company and an experienced team
ADSPL commenced operations from 2001. The company is promoted by its directors, Mr. Pankaj Kumar Srivastava, and Ms. Namrata Hirani who has experience of over a decade in the industry the company deals in. The company is spearheaded by Mr. Pankaj Srivastava, in the capacity of Director who has an experience of about three decades in diversified profiles and looks after the overall management of the company primarily pertaining to growth of business and securing new contracts. The top management is ably supported by a team of qualified and experienced professionals. Acuité believes that the company will continue to benefit from its experienced management and stablished relationships with its customers. Healthy financial risk profile The Company’s financial risk profile is marked by a heathy net worth, improvement in gearing and comfortable debt protection metrics. The tangible net worth of the company improved to Rs. 30.48 Cr in FY23 from Rs. 21.75 Cr in FY2022, due to accretion to reserves. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) has also improved to 0.49 times as on 31st March 2023 as against 0.75 times as on 31st March 2022. The company has been improving its gearing continuously over the past years. Its gearing for FY23 is stable at 0.27 times. It had earlier improved to 0.59 times in FY22 from 1.18 times in FY21. The company does not have any major capex plans moving forward and plans to keep its gearing ratios at current levels, showcasing stability in the financial structure. ADSPL’s Interest Coverage Ratio (ICR) and Debt Service Coverage Ratio (DSCR) has improved to 12.54 times in FY23 from 7.09 times in FY 22 and to 5.65 times in FY23 from 5.23 times in FY22 respectively. This shows the improving ability of the company to meet its financial obligations. The company’s earnings are more than sufficient to cover its principal and interest obligations thus increasing its ability to service debts and mitigate the risks of defaults. Acuite believes that in the foreseeable future, the financial risk profile of the company will improve backed by reduced gearing and comfortable debt protection metrices. Improvement in Working Capital Cycle The Company’s Gross Current Assets have improved to 173 days in FY 2023 from 213 days in FY2022. The main reason attributable is the decrease in debtor days to 74 days in FY23 from 156 in FY24. One of the major reasons for this improvement in debtor days has been the insertion of a new clause regarding payments to MSMEs. Also, during previous years, due to Covid-19, the collections were lower and as a result the debtor days were 337 days in Fy21. It has now improved to 74 days in FY23 owing to improvement in collections post Covid-19 and implementation of rules regarding MSMEs. Also, the cash balances and investments are high and as a result the GCA days are high currently. |
| Weaknesses |
| Fragmented nature of industry coupled with presence in a niche segment of interactive display
The company operates in the digital advertising industry which is characterized by low entry barriers and large number of players. Hence, the company is faced by intense competition putting pricing constraint to ADSPL and leads to limited bargaining power. Small scale of operations Though the company is in existence for close to one and a half decade, the operations of the company remained small with a total operating income of Rs. 48.03 crore in FY23. Small scale of operations limits the financial flexibility of the company. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The company’s liquidity is adequate marked by net cash accruals of Rs. 10.30 Cr. in FY2023 as against long term debt repayment of Rs.0.87 Cr. over the same period. The current ratio is healthy at 2.62 times as on March 31, 2023. Although it has declined from a previous current ratio of 3.03 times as on 31st March 2022, it still is healthy, signifying stable fundamentals to repay the amounts that are due within a year. The fund-based bank limit remained utilised at 69.38 per cent for the last seven months ended November 2023 thus highlighting the company’s ability to operate efficiently without relying heavily on credit. Moreover, the company has no major term loans thereby reducing risks of any defaults or unforeseen financial challenges. Acuité believes that the liquidity position of the company is likely to remain adequate backed by the steady accruals, absence of capex plans and a healthy current ratio over the medium term.
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| Outlook: Stable |
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Acuité believes that the company will maintain 'Stable' outlook over the medium term on back of experience of its management. The outlook may be revised to 'Positive' if there is substantial and sustained improvement in company'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.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 48.03 | 27.84 |
| PAT | Rs. Cr. | 8.71 | 7.05 |
| PAT Margin | (%) | 18.14 | 25.32 |
| Total Debt/Tangible Net Worth | Times | 0.27 | 0.59 |
| PBDIT/Interest | Times | 12.54 | 7.09 |
| 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 • Entities In Manufacturing Sector:- 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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