Long track record of operations and experienced management
ATPL is based out of Maharashtra and is incorporated in 1980 reflecting its long track record of operations of over three decades in providing industrial heat treatment services. The company is promoted by Mr. Vineet Pol and Mr. Prakash Pol who have a wide experience in the industrial heat treatment sector. The operations of the company are managed by a qualified and well experienced senior management team who are ably supported by a strong line of mid-level managers. The extensive experience of the promoters and the management has helped the company to establish long and healthy relationship with reputed customers and suppliers over the years. The key customers of the company include names such as JBM Auto Limited, Right Tight Fastners Private Limited and National Engineering Industries Limited among others.

Acuité believes that ATPL will continue to benefit from its established track record of operations and experienced promoter.

Healthy operating performance
ATPL provides a variety of industrial heat treatment services majorly to the OEM manufacturers in the automobile industry. In addition to heat treatment services, the company in 2020 has started manufacturing forgings and machining as a part of their backward integration initiative. The contribution of the manufacturing segment to its revenues is 25 percent and that of services is ~75 percent. ATPL over the last three years has registered a healthy growth in its revenue with a CAGR of 16.64 percent over FY21-23 (Provisional) period. The revenue of the company stood at Rs.25.40 crore in FY23 (Provisional) as against Rs.24.58 crore in FY22 and Rs. 16.01 crore in FY21. The improvement is majorly on account of growth in the manufacturing segment of the business. The share of component manufacturing increased from 17.88 percent in FY21 to 25.36 percent in FY23 (Provisional.). The operating margins of the company have shown a growth 436 bps over the last three years at the back of decline in input costs. The operating margin of the company stood at 25.03 percent in FY23 (Provisional) as against 24.83 percent in FY22 and 20.66 percent in FY21. The PAT Margins have also improved at 5.69 percent in FY23 (Provisional) as against 1.82 percent in FY22 and losses in FY21.
Acuité believes that the business risk profile of the company is likely to continue to improve on the back of reputed clientele and healthy demand expected over the near to medium term.

­Below average financial risk profile
The financial risk profile of the company is below average marked by low networth, high gearing and moderate debt protection metrics. The tangible networth of the company stood at Rs. 3.29 crore as on March 31, 2023 as against Rs. 1.56 crore as on March 31, 2022. The networth of the company as on March 31, 2021 remained negative on account of losses incurred by the company because of delay in implementation of capex for setting up of its manufacturing activities. Total debt of the company Rs. 24.34 crore as on March 31, 2023 (Provisional) as against Rs. 26.50 crore as on March 31, 2022 and Rs. 31.55 crore as on March 31, 2021. The management follows an aggressive financial policy marked by high Gearing (Debt to equity) at 7.39 times as on March 31, 2023 (Provisional) as against 17.03 times as on March 31, 2022. However, the gearing is likely to improve in the near to medium term on account of expected improvement in net worth led by likely increase in accretion of profits to reserves. The TOL/TNW (Total outside liabilities/Tangible Networth) has improved over the years however remains high at 8.65 times as on March 31, 2023 (Prov) as against 20.53 times as on March 31, 2022. Furthermore, the debt protection metrics of the company remained moderate with DSCR (Debt service coverage ratio) of 1.42 times and Interest Coverage Ratio of 2.85 times for FY23 (Provisional) as against 1.35 times for both in FY22 respectively.
Acuite believes improvement in ATPL’s financial risk profile over the medium term will remain a key rating monitorable.

Working capital intensive nature of operations
The working capital operations of the company are intensive reflected by fully utilised bank limits owing to high GCA days of 102 days in FY23 (Provisional) as against 121 days in FY22 and 159 days in FY21. The GCA days are majorly driven by the debtor collection period. The debtor collection period of the company stood improved and stood at 66 days in FY23 (Provisional) as against 92 days in FY22 and 121 days in FY21. For the heat treatment services ATPL requires consumables like Quenching Oil, Liquid Nitrogen and polymer which are regularly maintained by the company. For manufacturing of forgings steel is maintained for 10- 12 days basis the order received by the company. The inventory holding period of the company stood at 37 days in FY23 (Provisional) as against 26 days in FY22 and 28 days in FY21. The creditor days of the company stood at 83 days in FY23 (Provisional) as against 151 days in FY22 and 203 days in FY21. The working capital-intensive nature of operations has led to high reliance on bank limits marked by average utlilisation of fund based bank limits at 94 percent for 6 months ended April 2023.

Acuité believes that the ability of the company to manage its working capital operations will remain a key rating sensitivity over the medium term.

High customer concentration risk
ATPL is exposed to high customer concentration risk since ~50 per cent of the operating income in FY23 is derived from three customer. Further, out of these three customers, ~20-30 percent of the revenue generated over the last two years is from a single customer, i.e. JBM Auto Limited. However, such risk is partly mitigated by the long-standing relationship with such customers over a decade.