Rating Rationale
December 06, 2019 | Mumbai
ASI Industries Limited
Ratings downgraded to 'CRISIL BBB/CRISIL A3+'; Placed on 'Watch Negative'
 
Rating Action
Total Bank Loan Facilities Rated Rs.130 Crore
Long Term Rating CRISIL BBB (Downgraded from 'CRISIL BBB+/Stable'; Placed on 'Rating Watch with Negative Implications' )
Short Term Rating CRISIL A3+ (Downgraded from 'CRISIL A2'; Placed on 'Rating Watch with Negative Implications')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has downgraded its ratings on the bank facilities of ASI Industries Limited (ASIL; part of the ASI group) to 'CRISILBBB/CRISIL A3+' from 'CRISIL BBB+/Stable/CRISIL A2' and placed the ratings on 'Rating Watch with Negative implications'.
 
The rating action follows the announcement by ASI on 28th November 2019, about a direction received from the Department of Mining and Geology, Ramganjmandi, Kota, Rajasthan, for closure of mining activity alleging irregularities in environmental rules. CRISIL is in discussion with the management, and will take a final rating action once there is more clarity on the overall impact on the business and financial risk profiles.
 
The downgrade reflects the expected deterioration in the business risk profile which shall impact liquidity over the medium term. The operating income declined to 260 crore in fiscal 2019 from 314 crore in fiscal 2018, largely on account of decline in contribution from mining business. Due to the disturbance in the operations on account of closure direction from the Department of Mining and Geology, group's revenues are expected to remain constrained over the medium term which will impact the operating margins as well as the net cash accruals generation ability over the medium term. As the company has already initiated a large debt funded capex, the cushion between cash accruals and debt repayment obligations is expected to be impacted over the medium term in case of business impact. As a result, liquidity is expected to remain constrained.
 
The ratings reflect an established market position supported by the extensive experience of the promoters in the stone mining and marketing industry, and an above-average financial risk profile. These strengths are partially offset by working capital-intensive operations, and susceptibility to changes in government regulations and to project related risks.  

Analytical Approach

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of ASIL with its wholly owned subsidiaries, Al Rawasi Rock and Aggregates LLC (RRA) and ASI Global Ltd (ASIGL). These companies are together referred to as the ASI group.

Please refer Annexure - Details of Consolidation, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description
Strengths
* Established market position: The promoters have been in the Kota stone-mining business for the past three decades, resulting in an established relationship with over 1,000 diversified customers. The group is amongst the largest miners of Kota stone in India.
 
* Above-average financial risk profile: As on March 31, 2019, the networth was healthy at Rs 148 crore (Rs 129 crore a year earlier), while the total outside liabilities to adjusted networth ratio was moderate at 1.9 times. The interest coverage ratio was strong at 4.7 times for fiscal 2019.
 
Weaknesses
* Working capital-intensive operations: Gross current assets were high at 255 days, due to receivables of 174 days, as on March 31, 2019. However, diversified customers along with advances from dealers provide insulation against receivables risk.
 
* Susceptibility to changes in government regulations: The mining industry in India is highly regulated and plagued by irregularities. However, the group's business till now has not been significantly affected by changes in regulations although the current NGT ban on mining could impact the group's business over the medium term.
 
* Exposure to project related risks: The group is setting up a plant for engineered stone with an installed capacity of 600,000 square metre per annum entailing capital expenditure (capex) of about Rs 200 crore. The proposed project is expected to be completed in 15 months. The capex is likely to be funded through a term loan/capex letter of credit of Rs 130-135 crore and the remaining through internal cash accrual. Timely implementation of the proposed project, stabilisation of operations, and commensurate ramp-up of sales will remain critical to achieve growth in revenue and profitability, and hence, will be monitored closely.
Liquidity Adequate

Liquidity is supported by moderate bank limit utilisation, at an average of 78% over the six months through August 2019. Net cash accrual of around Rs 358 million were sufficient against debt obligation of Rs 24.2 crore in fiscal 2019. The company receives funding support from the promoters in the form of unsecured loans (Rs 47.8 crore as on March 31, 2019).

Rating sensitivity factors
Upward factors
* Improvement in operating income by more than 30% in fiscal 2020 as compared with fiscal 2019
* Significant increase in cash accrual
 
Downward factors
* Decline in operating income by more than 15% in comparison with fiscal 2019
* Fall in operating profitability from fiscal 2019 level
* Larger-than-expected debt-funded capex, weakening the financial risk profile

About the Company

Established in 1945 in Kota, Rajasthan, by members of the Jatia family, ASIL mines natural stone (Kota stone) on its 10 square kilometre land in Ramganj Mandi, Rajasthan. The company also generates wind power and trades in steel coils and fabrics.
 
RRA produces hard limestone rock products, which it supplies to various companies in the infrastructure, steel, cement, and real estate sectors in Dubai and in India.
 
ASIGL, based in Mauritius, acts as a marketing arm in the Mauritius market.

Key Financial Indicators
Particulars Unit 2019 2018
Revenue Rs crore 260.05 314.2
Profit after tax (PAT) Rs crore 22.97 19.2
PAT margin % 8.8 6.1
Adjusted debt/adjusted networth Times 1.5 1.4
Interest coverage Times 4.7 4.4
 

Status of non cooperation with previous CRA
ASIL has not cooperated with Credit Analysis & Research Ltd which has marked it as non-cooperative via rationale dated November 22, 2019. The reason provided by Credit Analysis & Research Ltd. is non-furnishing of information by ASIL.
 
ASIL has not cooperated with Credit Analysis & Research Ltd which has marked it as non-cooperative via rationale dated June 27, 2019. The reason provided by Credit Analysis & Research Ltd. is non-furnishing of information by ASIL.

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of Instrument Date of Allotment Coupon
Rate (%)
Maturity Date Issue Size
(Rs Cr)
Rating Assigned with Outlook
NA Cash Credit NA NA NA 42 CRISIL BBB/Watch Negative
NA External Commercial Borrowings NA NA May 2023 37.85 CRISIL BBB/Watch Negative
NA Term Loan NA NA May 2021 9.08 CRISIL BBB/Watch Negative
NA Term Loan NA NA June 2024 11.34 CRISIL BBB/Watch Negative
NA Term Loan NA NA June 2018 0.65 CRISIL BBB/Watch Negative
NA Proposed Long Term Bank Loan Facility NA NA NA 4.08 CRISIL BBB/Watch Negative
NA Letter of Credit NA NA NA 25 CRISIL A3+/Watch Negative

Annexure - List of entities consolidated
Names of Entities Consolidated Extent of Consolidation
ASI Industries Limited Full
Al Rawasi Rock and Aggregates LLC (RRA) Full
ASI Global Ltd (ASIGL) Full
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  105.00  CRISIL BBB/Watch Negative      30-11-18  CRISIL BBB+/Stable  31-10-17  CRISIL BBB+/Stable    --  -- 
Non Fund-based Bank Facilities  LT/ST  25.00  CRISIL A3+/Watch Negative      30-11-18  CRISIL A2  31-10-17  CRISIL A2    --  -- 
All amounts are in Rs.Cr.
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit 42 CRISIL BBB/Watch Negative Cash Credit 42 CRISIL BBB+/Stable
External Commercial Borrowings 37.85 CRISIL BBB/Watch Negative External Commercial Borrowings 37.85 CRISIL BBB+/Stable
Letter of Credit 25 CRISIL A3+/Watch Negative Letter of Credit 25 CRISIL A2
Proposed Long Term Bank Loan Facility 4.08 CRISIL BBB/Watch Negative Proposed Long Term Bank Loan Facility 4.08 CRISIL BBB+/Stable
Term Loan 21.07 CRISIL BBB/Watch Negative Term Loan 21.07 CRISIL BBB+/Stable
Total 130 -- Total 130 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Mining Industry
CRISILs Approach to Recognising Default
CRISILs Bank Loan Ratings
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt
The Rating Process
Understanding CRISILs Ratings and Rating Scales

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