Rating Rationale
July 20, 2020 | Mumbai
Affordable Robotic and Automation Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.25 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 Affordable Robotic and Automation Limited (ARAL).
 
The ratings continue to reflect the company's moderate financial risk profile and the extensive industry experience of its promoter in the industrial automation industry. These strengths are partially offset by large working capital requirement and susceptibility to cyclicality in the automotive industry.
 
ARAL has informed CRISIL that there was a procedural delay in payment of equated monthly instalment (EMI) of Rs 2.26 lakh on a business loan. The company was in discussion with the financial institution to avail the second phase of moratorium (June to August 2020) under the Reserve Bank of India's Covid-19 Regulatory Package, and hence the EMI which was due on June 2, 2020, was delayed. Nonetheless, the company immediately paid the EMI post communication from the financial institution. Furthermore, the company has paid its July EMI on the scheduled due date. CRISIL understands that the delay was a one-off event on account of moratorium discussions. CRISIL believes the delay arose due to temporary operational challenges amid the lockdown to contain the Covid-19 pandemic and was procedural. This is in line with the Securities and Exchange Board of India's circular (SEBI/HO/MIRSD/CRADT/CIR/P/2020/53) issued on March 30, 2020.

Key Rating Drivers & Detailed Description
Strengths:
* Extensive experience of the promoter: The promoter's experience of over a decade in the industrial automation business and established relationships with key customers should continue to support the business.

* Moderate financial risk profile: Networth was moderate at Rs 52.35 crore and gearing low at 0.46 time as on March 31, 2020. Interest coverage and net cash accrual to total debt ratio were adequate at 5.12 times and 0.27 time, respectively, for fiscal 2020. The networth had increased in fiscal 2019 post listing on the BSE-SME platform.

Weaknesses
* Large working capital requirement: The working capital-intensive operations are reflected in gross current assets (GCAs) of 346 days as on March 31, 2020. Marginal stretch in receivables and moderate inventory led to higher GCAs than the historical level. Controlled working capital management remains critical.

* Susceptibility to cyclicality in the automotive industry: The company primarily supplies robotics/automated welding lines and precision components to the automotive industry. The slowdown in the automotive industry in fiscal 2021, driven by the Covid-19 pandemic, may adversely impact ARAL's operating performance. CRISIL believes the company's business risk profile will remain vulnerable to cyclicality in the automotive industry.
Liquidity Stretched

Bank limit was utilised extensively at 94% on average over the 12 months through April 2020. Cash accrual is expected over Rs 5 crore per annum, which will be sufficient to meet annual debt obligation of Rs 1.2 crore over the medium term. Current ratio was adequate at 1.71 times as on March 31, 2020. Effective working capital management, mainly efficiency in receivables collection, remains critical to cushion the liquidity.

Outlook: Stable

CRISIL believes ARAL will continue to benefit from its promoter's extensive industry experience.

Rating Sensitivity factors
Upward Factors
* Sustained topline of over Rs 90 crore along with stable operating margin leading to higher cash accrual
* Efficient working capital management

Downward Factors
* Significant drop in revenue with operating margin falling below 8%
* Further stretch in the working capital cycle, adversely impacting liquidity.
About the Company

Incorporated in 2009 and based in Pune, ARAL is promoted by Mr Milind Padole. It primarily provides automation solutions for welding lines using robotics and related designing services. It also provides material handling automation services and has ventured into automated car parking systems.

Key Financial Indicators
As on/for the period ended March 31 Unit 2020* 2019
Operating income Rs crore 86.35 82.37
Reported profit after tax (PAT) Rs crore 4.87 2.15
PAT margin % 5.6 2.6
Adjusted debt/adjusted networth Times 0.46 0.51
Interest coverage Times 5.12 3.76
*Provisional

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments and are included (where applicable) in the Annexure -- Details of Instrument in this Rating Rationale. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of
instrument
Date of
allotment
Coupon rate (%) Maturity
date
Issue size (Rs.Crore) Complexity Levels Rating assigned with outlook
NA Bank Guarantee NA NA NA 5 NA CRISIL A4+
NA Cash Credit NA NA NA 12 NA CRISIL BB/Stable
NA Proposed Bank Guarantee NA NA NA 1 NA CRISIL BB/Stable
NA Proposed Cash Credit Limit NA NA NA 7 NA CRISIL BB/Stable
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  19.00  CRISIL BB/Stable      04-12-19  CRISIL BB/Stable  14-06-18  CRISIL BB+/Stable      CRISIL BB-/Stable 
            08-01-19  CRISIL BB+/Stable           
Non Fund-based Bank Facilities  LT/ST  6.00  CRISIL BB/Stable/ CRISIL A4+      04-12-19  CRISIL BB/Stable/ CRISIL A4+  14-06-18  CRISIL A4+      CRISIL A4+ 
            08-01-19  CRISIL BB+/Stable/ CRISIL A4+           
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 5 CRISIL A4+ Bank Guarantee 5 CRISIL A4+
Cash Credit 12 CRISIL BB/Stable Cash Credit 12 CRISIL BB/Stable
Proposed Bank Guarantee 1 CRISIL BB/Stable Proposed Bank Guarantee 1 CRISIL BB/Stable
Proposed Cash Credit Limit 7 CRISIL BB/Stable Proposed Cash Credit Limit 7 CRISIL BB/Stable
Total 25 -- Total 25 --
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 Engineering Sector
CRISILs Criteria for rating short term debt

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