­Acuité has considered the consolidated business and financial risk profiles of Balaji Aluminium Extrusions Private Limited and Bhagwati Recycling Private Limited to arrive at this rating. The consolidation takes into account the business synergies of both the entities.

­Experienced management
BRPL has been promoted by Mr. Arpit Aggarwal and Ms. Purty Aggarwal. The promoters have an industry experience of around 11 years and 5 years respectively through their association with BRPL and a group concern, Balaji Aluminium Extrusions Private Limited (BAEPL).

Deterioration in profitability margins despite improvement in revenues
The group has recorded a 55.51% YoY growth in the operating performance to Rs. 80.45 Cr in FY23 as against Rs. 51.73 Cr in FY22. However, the group’s profitability deteriorated in FY23 as reflected by a 465bps dip in the EBITDA margins to Rs. 3.08% in FY23 as against 7.73% in FY22. In line with the EBITDA margin coupled with high depreciation and the interest expenses. The group reported net losses of Rs. -2.17 Cr in FY23 s against -1.96 Cr in FY22. The group’s margins have seen a decline for two consecutive years in FY2022 and FY 2023. The group’s profitability declined in FY22 on account of high depreciation and interest costs. The profitability further declined in FY23 on account of declining price trend on aluminium in FY23 resulting in the inventory losses to the group.

Weak Financial Risk Profile
The financial risk profile of the group is weak marked by net losses, high gearing and below average debt protection metrics. The tangible networth of the group declined and stood at Rs. 3.76 Cr in FY23 as against Rs. 6.15 Cr in FY22. The debt outstanding of the group in FY23 comprises of long-term debt of Rs. 17.95 Cr, Rs. 3.91 Cr of interest-free unsecured loans from promoters and directors and Rs. 11.58 Cr of short-term debt. The gearing of the group declined to 8.90 times in FY23 as against 4.91 times in FY22. The TOL/TNW deteriorated to 14.71 times in FY23 as against 7.38 times in FY22. The net losses resulted in weak debt protection metrics as reflected by debt service coverage ratio which stood at 0.43 times in FY23 as against 0.76 times in FY22. The interest coverage ratio stood at 1.28 times in FY23 as against 2.40 times in FY22.

Working capital intensive in nature
The operations of the group are working capital intensive in nature marked by high GCA days which improved yet remained high at 167 days in FY23 as against 199 days in FY22. The inventory levels improved and stood at 58 days in FY23 as against 77 days in FY22. The group has receivable days of 96 days in FY23, as against 102 days in FY22. The creditor days of the group stood at 121 days in FY23 as against 153 days in FY22. The average bank limit utilisation by the group stood high at 97.99% in FY23.