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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 59.65 | ACUITE BBB- | Stable | Assigned | - |
| Bank Loan Ratings | 130.35 | - | ACUITE A3 | Assigned |
| Total Outstanding | 190.00 | - | - |
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Rating Rationale |
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Acuite has assigned its long-term rating of 'ACUITE BBB-' (read as ACUITE triple B minus) and a short-term rating of 'ACUITE A3' (read as ACUITE A three) on the Rs.190.00 Cr. bank facilities of Atmastco Limited. The outlook is 'Stable'.
Rationale for Rating The rating reflects the stable business risk profile marked by diversified revenue from fabrication and engineering, EPC of structural infrastructures and trading of cutting tools, grinding wheels, helmets, with a moderate order book. It has presence in both Private and Government sector. It has a strong clientele base namely Vedanta Limited, Tata Steel Limited, Adani, Bharat Heavy Electricals Limited among others. The rating also takes into account healthy financial risk profile marked by comfortable net worth, moderate debt protection metrics and adequate liquidity position. However, the ratings are constrained by it’s working capital intensive nature of operations |
| About the Company |
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Established in 1994 in Chattisgarh, Atmastco Limited (Atmastco) is engaged in fabrication and engineering, EPC of structural infrastructure, manufacturing of steel components and provide quality and innovative solutions for commercial, residential, and industrial buildings. The directors include, Ms. Jayasudha Swaminathan, Mr. Subramaniam Swaminathan Iyer, Mr. Venkataraman Ganesan, Mr. Chandan Ambaly, Mr. Siddhartha Shankar Roy and Mr. Gobichettipalayam Srinivasan Venkatasubramanian.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of Atmastco Limited to arrive at the rating.
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| Key Rating Drivers |
| Strengths |
| Established track record of operations and strong clientele base with diversified geographic presence
Atmastco has been in operations for more than two decades and has established healthy relationships with the clientele. The company’s growth is aided by the industry experience of Mr. Subramaniam Swaminathan Iyer along with the other promoters. It has some marquee clients such as Vedanta Limited, Tata Steel Limited, Bharat Heavy Electricals Limited, Engineers India Limited among others. The contribution from Government sector is 40 percent and the rest is from private sector. The presence of the government clientele keeps the counterparty default risk lower. Moreover, the company has established a diversified presence with operations in Chhattisgarh, Tamil Nadu, Jammu and Kashmir and New Delhi. Acuité believes that the long-standing operations and the vintage of the promoters coupled with healthy relations with the clientele will continue to benefit the company going forward. Healthy financial risk profile The financial risk profile of the company is healthy marked by comfortable adjusted net worth, moderate gearing and comfortable debt protection metrics. The adjusted tangible net worth stood at Rs.125.14 Cr. in FY 2024 as compared to Rs.69.37 Cr. in FY 2023 and Rs. 44.62 Cr. in FY2022 due to accretion of reserves of Rs 16.71 Cr, fresh issue of shares of Rs. 39.90 Cr. and unsecured loans being treated as quasi equity and other prior adjustments of Rs 0.95 Cr. Acuite has considered unsecured loans of Rs. 16.98 Cr. in FY 2024 as compared to Rs. 14.41 Cr. in FY 2023 and Rs. 2.27 Cr. as quasi equity, as the same is sub ordinated to bank loans. Adjusted gearing stood comfortable at 0.43 times in FY2024 compared to 0.82 times in FY2023 and 1.10 times in FY2022. The interest coverage ratio stood at 3.24 times in FY2024 compared to 3.25 times in FY2023 and 1.92 times in FY2022. The debt service coverage ratio stood at 2.00 times in FY2024 compared to 2.23 times in FY2023 and 1.74 times in FY2022. The TOL/TNW stood at 1.33 times in FY2024 compared to 2.40 times in FY2023 and 1.97 times in FY2022. Acuite believes that the company’s financial risk profile will remain at a healthy level in medium term backed by steady cash accruals. Declining but healthy revenues along with increasing operating profitability Despite the decline of revenues to Rs. 224.01 Cr. in FY 2024 from Rs. 241.95 Cr. in FY 2023 and Rs. 93.61 Cr. in FY 2022, it still continues to remain healthy. The reason for decline in revenues in FY 2024 is because most of the orders completed towards the year end remain unbilled and are lying under work-in-progress .The operating profitability has increased to 17.33 percent in FY 2024 as compared to 12.81 percent in FY 2023 because contribution from EPC sector has increased since FY 2023 which commands higher margin and it caters to both sectors i.e. Private and Government with price escalation clauses in built in it's work contracts. The unexecuted order book stands at Rs. 414. 23 Cr. as on June, FY 2024 which provides revenue visibility over near to medium term. The contribution from private sector is 60% and Government sector is 40% which leads to better margins. The decline in margins in FY 2023 was a result of correction in the prices of steel in the fabrication unit which had a higher percentage contribution in the revenues. |
| Weaknesses |
| Intensive working capital management
The operations of the company have an intensive working capital cycle days as reflected from Gross Current Assets of 423 days in FY2024 compared to 293 days in FY2023 and 401 days in FY2022. The inventory days stood at 180 days in FY2024 as compared to 166 days in FY2023 and 217 days in FY2022. The debtor days stood at 128 days in FY2024 compared to 56 days in FY2023 and 132 days in FY2022. The other current assets amounts to Rs. 83.25 Cr. in FY 2024. The creditor days stood at 179 days in FY2024 compared to 170 days in FY2023 and 117 days in FY2022. Acuite believes that working capital requirements are expected to remain intensive due to the collection mechanism policy of the company over the medium term. Customer Concentration Risk The company being a specialised contractor in EPC of structural infrastructures has led to increased dependence on orders from Vedanta Limited, contributing to higher share in the order book position. About 55.19 percent of the current order book dated June FY 2024 are from Vedanta Limited. The same has led to customer concentration risk of contracts. Acuité believes that the revenues and margins are susceptible to the customer concentration risk. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The liquidity is adequate marked by steady net cash accruals of Rs. 21.16 Cr. in FY 2024 as against long term debt repayment of Rs. 4.41 Cr. over the same period. The cash and bank balances stood at Rs. 0.70 Cr. in FY 2024 as compared to Rs. 1.34 Cr. in FY 2023 and Rs. 0.01 Cr. in FY 2022. The current ratio stood at 2.10 times in FY 2024 as compared to 1.59 times in FY 2023 and 1.54 times in FY 2022. The promoters have demonstrated flexibility to infuse funds in the past as and when needed to support the growth in the business. Moreover, the fund-based limit was utilized at 85.30 per cent for the six-months ended June 2024. Acuité believes that going forward the liquidity position of the company will remain adequate in the absence of any major debt funded capex plans.
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| Outlook: Stable |
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Acuité believes that Atmastco Limited will continue to maintain a ‘stable’ outlook over the medium term due to its experienced management and established track record along with moderate order book position. The outlook may be revised to 'Positive', in case of higher than-expected revenues and profitability, while maintaining its capital structure and improving its working capital cycle days. Conversely, the outlook may be revised to 'Negative' in case Atmastco Limited registers lower-than-expected revenues and profitability or any further stretch in its working capital requirement leads to deterioration of its financial risk profile and liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 224.01 | 241.95 |
| PAT | Rs. Cr. | 16.71 | 12.78 |
| PAT Margin | (%) | 7.46 | 5.28 |
| Total Debt/Tangible Net Worth | Times | 0.43 | 0.82 |
| PBDIT/Interest | Times | 3.24 | 3.25 |
| Status of non-cooperation with previous CRA (if applicable) |
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IND-RA, vide its press release dated April 8th, 2024 had denoted the rating of Atmastco Limited as 'IND-RA BB+/Stable/A4+; REAFFIRMED AND ISSUER NOT CO-OPERATING’.
CARE, vide its press release dated September 14th, 2023 had denoted the rating of Atmastco Limited as 'CARE B+/Stable/A4; REAFFIRMED, DOWNGRADED AND ISSUER NOT CO-OPERATING’. |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.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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| Rating History:Not Applicable |
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