Rating Rationale
December 13, 2018 | Mumbai
ASL Industries Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.30 Crore
Long Term Rating CRISIL BB/Stable (Reaffirmed)
Short Term Rating CRISIL A4+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL BB/Stable/CRISIL A4+' ratings on the bank facilities of ASL Industries Limited (AIL).
 
The ratings continue to reflect the experience of the promoters in the iron and steel industry and a moderate financial risk profile. These strengths are partially offset by large working capital requirement.

Key Rating Drivers & Detailed Description
Strengths
* Extensive industry experience of the promoters
The company commenced operations with trading in iron and steel in 1987. It established a strong and stable relationship with key customers such as Tata Motors Limited (TML), Indian Railways, and York Transport Equipment India Ltd, as reflected in repeat orders from them.
 
* Comfortable financial risk profile
The networth was healthy at Rs 33.63 crore and the gearing moderate at 0.90 time, as on March 31, 2018. The gearing is expected to remain stable over the medium term in the absence of any debt-funded capital expenditure (capex) plans. However, the net cash accrual to total debt and interest coverage ratios were modest at 0.05 time and 0.9 time, respectively, in fiscal 2018 on account of a decline in profitability. With recovery in profitability, the metrics should return to historical comfortable levels.
 
* Weakness:
Large working capital requirement
Gross current assets were 153 days as on March 31, 2018, because delivery schedules are not fixed and bulk raw material inventory needs to be maintained for TML, which contributes a major portion of the revenue.
Outlook: Stable

CRISIL believes AIL will continue to benefit from its established market position, backed by regular offtake by TML. The outlook may be revised to 'Positive' if revenue is diversified, and revenue and profitability increase substantially. The outlook may be revised to 'Negative' if a decline in profitability or large, debt-funded capex weakens the capital structure.
 
Liquidity
Liquidity is adequate. Cash accrual was Rs 4.0-4.5 crore, against term debt obligation of Rs 3.49 crore, in fiscal 2019. Average utilisation of the fund based limit of Rs 11.5 crore was 84% during the 12 months through August 2018. Furthermore, the promoters provide funding support through unsecured loans or equity as and when needed. During fiscal 2018, equity infusion of Rs 9.8 crore was made to fund the bank debt obligation on account of insufficient cash accrual following a net loss.

About the Company

AIL is part of the Jamshedpur, Jharkhand-based ASL group, which has interests in iron and steel, sheet metal components, forged components, and assemblies and is an authorised sales and service dealer for TML. Mr Dilip Kumar Goyal, Mr Akshay Goyal, Mr Ankit Goyal, and Mr Manoj Kumar Agarwal manage operations. The company was incorporated in 1992.

Key Financial Indicators
Particulars Unit 2018 2017
Revenue Rs crore 70.82 56.96
Profit after tax (PAT) Rs crore (2.22) 0.50
PAT margin % (3.1) 0.9
Adjusted debt/adjusted networth Times 0.90 1.35
Interest coverage Times 0.9 2.15

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 Rating assigned with Outlook
NA Cash Credit NA NA NA 9.5 CRISIL BB/Stable
NA Long Term Loan NA NA Jun-2023 4.85 CRISIL BB/Stable
NA Bank Guarantee NA NA NA 2 CRISIL A4+
NA Proposed Long Term Bank Loan Facility NA NA NA 13.65 CRISIL BB/Stable
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  28.00  CRISIL BB/Stable      26-12-17  CRISIL BB/Stable  22-09-16  CRISIL BB/Stable  23-06-15  CRISIL BB/Stable  Suspended 
Non Fund-based Bank Facilities  LT/ST  2.00  CRISIL A4+      26-12-17  CRISIL A4+  22-09-16  CRISIL A4+  23-06-15  CRISIL A4+  Suspended 
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
Bank Guarantee 2 CRISIL A4+ Bank Guarantee 2 CRISIL A4+
Cash Credit 9.5 CRISIL BB/Stable Cash Credit 8.5 CRISIL BB/Stable
Long Term Loan 4.85 CRISIL BB/Stable Long Term Loan 3 CRISIL BB/Stable
Proposed Fund-Based Bank Limits 13.65 CRISIL BB/Stable Proposed Long Term Bank Loan Facility 16.5 CRISIL BB/Stable
Total 30 -- Total 30 --
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
CRISILs Approach to Recognising Default

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