Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 10.00 ACUITE B+ | Stable | Reaffirmed -
Bank Loan Ratings 4.50 ACUITE B+ | Stable | Assigned -
Total Outstanding Quantum (Rs. Cr) 14.50 - -
Total Withdrawn Quantum (Rs. Cr) 0.00 - -
 
Rating Rationale

­Acuité has reaffirmed the long-term rating to ‘ACUITE B+’ (read as ACUITE B plus) on the Rs.10.00 crore bank facilities of Specific Alloys Pvt Ltd (SAPL).
Acuité has assigned the long-term rating to ‘ACUITE B+’ (read as ACUITE B plus) on the Rs. 4.50 crore bank facilities of Specific Alloys Pvt Ltd (SAPL). The outlook is ‘Stable’.

Rationale for reaffirmation
The rating reaffirmation takes into consideration company’s long track record of operations and established market position in the aluminum industry. The rating is however constrained by the deteriorating operating performance, weak financial risk profile and stretched liquidity position of the company

About the Company

­Incorporated in 2000, Specific Alloys Private Limited (SAPL) is a Maharashtra-based company engaged in manufacturing of aluminum alloys of all grades. It is operated by its managing director, Mr. Narendra Mohanlal Surana, along with directors, Mr. Lakendra Narendra Surana and Mr. Jinendra Narendra Surana. It has two manufacturing units; one in Alandi, Maharashtra whose capacity is 375 MT per month with utilization of 370 MT per month and another one in Pirangut, Maharashtra, whose capacity is 225 MT per month with utilization of 150 MT per month.
 
Analytical Approach

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

Key Rating Drivers

Strengths

­Established track record of operations and experienced management
Incorporated in 2000, Specific Alloys Private Limited (SAPL) is led by its managing director, Mr. Narendra Mohanlal Surana, who has experience of more than three decades in the aluminum industry and directors, Mr. Lakendra Narendra Surana and Mr. Jinendra Narendra Surana, who have experience of a decade in the aluminum industry. The extensive experience of the directors has led to established market presence of SAPL, enabling it to build strong business ties with its suppliers and customers.
Acuité believes that the company will benefit from its experienced management, long track of operation and diversified product portfolio.

Weaknesses

­Deteriorating operating performance
Operating performance of SAPL has seen a deterioration as revenues of the company have dropped to Rs. 46.16 crores in FY2022 from Rs. 51.00 crores in FY2021. Its peak turnover was at Rs. 92.20 crore in FY2018. Specific Alloys Pvt Ltd manufactures various types of Aluminum alloys for Auto ancillary companies. EBITDA margins of the company remained range bound at 8.13 percent in FY2022 as against 8.94 percent in FY2022. PAT margins stood at 1.18 percent in FY2022 as against 1.05 percent in FY2021.

Working Capital Operation is intensive in nature
Working capital operations of the company is intensive marked by GCA days of 345 days in FY2022 as against 290 days in FY2021. High GCA days are driven by high debtor and inventory days. Debtor days stood at 205 days in FY2022 as against 168 days in FY2021. Higher debtor days in FY2022 is on account of year end sales in FY2022. Inventory holding period stood at 135 days in FY2022 as against 126 days in FY2021. Raw materials of the company majorly include aluminum scrap.
Acuité believes that the ability of the company to efficiently manage its working capital requirements will remain key rating sensitivity.

Weak Financial risk profile
Financial risk profile of the company is weak with a moderate tangible networth, high gearing and stretched debt protection metrics. Tangible networth of the company stood at Rs. 10.16 crore as on 31 st March 2022 as against 9.61 crore as on 31 st March 2021. Increase in tangible networth is on account of accretion of profits to reserves. Gearing of the company is high at 4.24 times as on 31 st March, 2022 as against 4.32 times as on 31 st March, 2021. TOL/TNW stood at 4.26 times as on 31 st March 2022 as against 4.39 times as on 31 st March, 2021. Debt protection metrics of the company is stretched with DSCR below unity. DSCR of the company stood at 0.69 in FY2022 as against 0.52 times in FY2021. Interest coverage ratio stood at 1.29 times in FY2022 as against 1.36 times in FY2021.
Acuite believes that the financial risk profile of the company is likely to remain weak on account of slow recovery in the business risk profile and significant debt repayment obligation.

Competitive and fragmented industry
SAPL operates in a highly competitive and fragmented industry characterized by presence of large number of organised and unorganised players, affecting margins and bargaining power with customers

Rating Sensitivities

­Improvement in the scale of operation while maintaining its profitability margin at the current level
Any deterioration or stretch in the working capital cycle may impact the financial risk profile
 
Material covenants
­None
 
Liquidity: Stretched

­SAPL has a stretched liquidity marked by insufficient net cash accrual as against debt repayment obligation. Net cash accruals of the company stood low at Rs.0.84 crore in FY2022 as against debt repayment obligations of Rs. 2.5 crore during the same period. The company is expected to generate insufficient net cash accruals as against the debt repayment obligation. Further, the company has high reliance on working capital limits as the bank limit remian fully utilized. The company has unencumbered cash balances of Rs. 0.56 crore as on 31 st March 2022 as against Rs. 0.45 crore as on 31 st March, 2021.
Acuité believes that the liquidity of the company is likely to remain stretched on account of insufficient net cash accruals and significant debt repayment obligations.
 
Outlook: Stable

­Acuité believes that SAPL will maintain a `Stable' business profile in the medium term, while benefitting from its experienced management, growth in operations and comfortable working capital cycle. The outlook may be revised to 'Positive' if ATPL shows significant improvement in financial risk profile and revenues while maintaining profitability. Conversely, the outlook may be revised to 'Negative' in case the company registers lower-than- expected growth in revenues and profitability or in-case of further deterioration in financial risk profile.
 
Other Factors affecting Rating
­Not Applicable
 

Particulars Unit FY 22 (Provisional) FY 21 (Actual)
Operating Income Rs. Cr. 46.16 51.00
PAT Rs. Cr. 0.54 0.53
PAT Margin (%) 1.18 1.05
Total Debt/Tangible Net Worth Times 4.24 4.32
PBDIT/Interest Times 1.29 1.36
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
• 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
https://www.acuite.in/view-rating-criteria-55.htm

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
29 Aug 2022 Cash Credit Long Term 7.50 ACUITE B+ | Stable (Reaffirmed)
Bills Discounting Short Term 2.50 ACUITE A4 (Reaffirmed)
09 Jun 2021 Bills Discounting Short Term 2.50 ACUITE A4 (Reaffirmed)
Cash Credit Long Term 7.50 ACUITE B+ | Stable (Downgraded from ACUITE BB- | Stable)
17 Sep 2019 Bills Discounting Short Term 2.50 ACUITE A4 (Reaffirmed)
Cash Credit Long Term 7.50 ACUITE BB- | Stable (Reaffirmed)
04 Jul 2018 Cash Credit Long Term 7.50 ACUITE BB- | Stable (Assigned)
Bills Discounting Short Term 2.50 ACUITE A4 (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Rating
Canara Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 10.00 ACUITE B+ | Stable | Reaffirmed
Canara Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 4.50 ACUITE B+ | Stable | Assigned

Contacts
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