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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 50.00 | ACUITE BB+ | Stable | Assigned | - |
| Bank Loan Ratings | 16.00 | - | ACUITE A4+ | Assigned |
| Total Outstanding Quantum (Rs. Cr) | 66.00 | - | - |
| Rating Rationale |
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Acuite has assigned its long term rating of 'ACUITE BB+' (read as ACUITE double B plus) and short term rating of 'ACUITE A4+' (read as ACUITE A four plus) on the Rs.66.00 Crore bank facilities of Vananchal Concast Private Limited (VCPL). The outlook is 'Stable'.
Rationale for Rating The rating assigned reflects the moderate capital structure of the company with an equity infusion of Rs 63.15 Cr in FY 2023 and moderate debt protection metrics. Further, the rating considers the adequate liquidity of the company with a moderate reliance on short term bank borrowings with an average utilization of 63.36% in last 15 months ending July 2023. The rating also factors in the experience of the promoters in the industry which is also reflected from its growing revenue driven by increase in metal prices.. However, the above mentioned strengths are partly off-set by the working capital intensive operations of the company with a high GCA days of 120 days and vulnerability in the margins due to fluctuations in the raw material prices of the company. |
| About the Company |
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Vananchal Concast Private Limited was incorporated in 2019, based in Jharkhand, managed by Mr. Nitin Bhalotia and Mr. Ankit Poddar. The company engaged in manufacturing of MS Billets.
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| Analytical Approach |
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Acuité has taken the standalone view on the business and financial risk profile of Vananchal Concast Private Limited.
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Key Rating Drivers
| Strengths |
| Experienced Management
VCPL has been engaged in manufacturing of MS Billets and has started its full fledge operations in 2023. Currently the company is managed by Mr. Nitin Bhalotia and Mr. Ankit poddar who has an experience in manufacturing of MS Billets. The company caters to strong customer base in various end-user industries. The company witnessed increase in the top-line of the company FY23 which stood at Rs.250.86 Crore as compared to Rs.34.94 Crore in FY22 and Rs.27.26 Crore in FY21. It was a greenfield project which have been completed more than 83% in FY23 with an installed capacity of 25000 MT. In the initial two years, the company recorded revenue through trading business and in FY23, the installation of machineries was completed more than 83% with a capacity of 25000 MT which will be increase to 30000 MT by FY24. Further, the manufacturing business contributed 80% in total sales and rest was contributed through trading business. Further, the margins of the company are attributable to volatility in the raw material prices resulting into pressure on margins in FY23 which stood at 2.21% and 3.07% in FY22. The PAT margins of the company stood at 0.68% in both years. Going forward, the company is expected to increase in the top-line of the company under range of Rs.300 Crore with better margins on the back of increase in the production due to increase in installed capacity post completion of capex. Acuite believes that the ability of company to ramp up the production and increase its top line is a key rating sensitivity. Moderate Financial Risk Profile The financial risk profile of the company is moderate marked by moderate net-worth, gearing and debt protection metrics. The net worth of the company stood at Rs.75.14 Crore as on 31st March 2023 against Rs.10.22 Crore as on 31st March 2022. The increase in the net worth is due to accumulation of profits in reserves and infusion of equity of Rs.63.15 Crore in FY23. The total debt of the company stood at Rs.20.89 Crore as on 31st March 2023 against Rs.10.34 crore as on 31st March 2022. The long term debt of the company are Vehicle loans which stood at Rs.2.33 Crore as on 31st March 2023, short term borrowing is cash credit of Rs.17.65 Crore as on 31st March 2023. The promoters of the company infused funds in the business to support the capital expenditure in form of quasi equity as the unsecured loans are subordinated (condition mentioned in the sanction letter). The capital expenditure is related to greenfield expansion plan in which company is developing its manufacturing plant of MS billets and currently the installed capacity is nearly 25000 MT which will be increased to 30000 MT post capex plan. Further, the ICR and DSCR ratio of the company stood moderate at 3.34 times and 2.82 times respectively as on 31st March 2023 against 1.93 times and 1.79 times respectively as on 31st March 2022. The gearing ratio of the company stood on 0.28 times as on 31st March 2023 due to additional quasi equity infused into business related to capital expenditure and will convert this quasi equity into equity share capital on y-o-y basis in near future. TOL/TNW ratio stood at 0.49 times as on 31st March 2023 against 2.84 times as on 31st March 2022. Acuite believes that financial risk profile of the company is likely to improve in near to medium term in absence of debt-funded capex. |
| Weaknesses |
| Working Capital Intensive Operations
The working capital operations of the company are intensive marked by GCA days stood at 120 days as on 31st march 2023 against 222 days as on 31st march 2022. However, GCA days are improved on an account of improved inventory holding days which stood at 35 days as on 31st March 2023 against 113 days as on 31st March 2022. The inventory comprises of both trading and manufacturing portion as the production started in last month of FY22 resulting in higher inventory days in that year. The average inventory days maintained by the company is approximately 30 days. Further, the debtor days of the company stood at 70 days as on 31st March 2023 against 54 days as on 31st March 2022. The average credit allowed by the company is under the range of 60-90 days. On the other hand, the creditor days of the company stood at 3 days as on 31st March 2023. Acuite believes that the working capital operations of the company may continue to remain in the same range in near to medium term. Fragmented industry characterized by intense competition and vulnerability to changes in commodity prices The company works in a highly competitive and fragmented segment of the Indian aluminium market, which is characterised by the existence of numerous small, unorganised players. As a result, the industry's players have little pricing power and are subject to pressure from the competition to increase their profitability. Aside from this, its products, which are mostly used by intermediaries, are exposed to the risks linked to industry cyclicality and pricing volatility. The susceptibility of the margins to changes in the raw materials price is inherent in this industry. |
| Rating Sensitivities |
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| All Covenants |
| None. |
| Liquidity Position |
| Adequate |
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The liquidity profile of the company is adequate. The company has generated net cash accruals of Rs.3.41 Crore as on 31st March 2023 against the debt repayment obligations of Rs.0.12 Crore in the same period. Going forward, the company is expected to generate sufficient net cash accruals against its debt repayment obligations in near term to medium term. The current ratio of the company stood at 1.37 times as on 31st March 2023 against 0.85 times as on 31st March 2022. The unencumbered cash and bank balance of the company stood at Rs.1.69 Crore as on 31st March 2023 against Rs.2.09 Crore as on 31st March 2022. The fund based bank limit utilization of the company stood moderate at 63.36% in last 15 months ending July 2023.
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| Outlook: Stable |
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Acuité believes that VCPL will maintain a ‘Stable’ outlook and will continue to derive benefit over the medium term due to completion of capex and growing top line. The outlook may be revised to ‘Positive’, if the company demonstrates substantial and sustained growth in its revenues while maintaining its margins and is able to improve working capital operations. Conversely, the outlook may be revised to ‘Negative’ if the company generates lower than anticipated cash accruals, most likely due to significant debt funded capex or impact on profitability margins, thereby impacting its financial risk profile, particularly its liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 250.86 | 34.94 |
| PAT | Rs. Cr. | 1.70 | 0.24 |
| PAT Margin | (%) | 0.68 | 0.68 |
| Total Debt/Tangible Net Worth | Times | 0.28 | 1.01 |
| PBDIT/Interest | Times | 3.34 | 1.93 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| 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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| Rating History : |
| Not Applicable |
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