| Persang Alloy Industries Private Limited | ||||
| Rating upgraded to 'CRISIL BBB/Stable'; rated amount enhanced for Bank Debt | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its rating on the long-term bank facilities of Persang Alloy Industries Private Limited (PAI) to ‘CRISIL BBB/Stable’ from ‘CRISIL BBB-/Stable’.
The rating upgrade reflects improvement in business supported by increased capacity and addition of new customer and financial risk profiles of PAI. Market position as reflected in revenue estimated to increase to Rs 155 crore in FY22 (against 93 crore in FY21) due to increased volume and improvement in average sales realisation. Simultaneously, operating margin estimated to remain comfortable over 12% in FY22 and expected to remain comfortable over the medium term. Furthermore, company has established market share in in the solders, lead-free alloys and fluxes industry which would support business risk profile of company over the medium term.
The rating upgrade also reflects continuous improvement in financial risk profile in past. Gearing estimated to improve from 2.14 times as on March 31, 2019 to below 1.1 times as on March 31, 2022 due to improved profitability. With lower reliance on external borrowings and improved profitability, debt protection metrics were comfortable too, with interest coverage ratio estimated over 5.5 times in FY22. In absence of large debt funded capex plan and low incremental working capital requirement, the financial risk profile expected to strengthen over the medium term. Subsequently, the liquidity has also improved during corresponding period.
The rating reflects extensive experience of the promoter in the solders and alloy industry and established clientele and comfortable financial risk profile. These strengths are partially offset by improving although moderate scale of operation &exposure to volatility in raw material prices and moderate working capital requirement. |
Analytical Approach Unsecured loan extended by the promoter has been treated as neither debt nor equity as the loan is subordinate to bank debt and is expected to remain in the business over the medium term. |
Key Rating Drivers & Detailed Description Strengths:
The promoter has experience of over two decades in the solders and alloy industry; his strong understanding of market dynamics and healthy relationships with customers and suppliers should continue to support the business risk profile. The repute clientele comprises Dixon Technologies Ltd, Crompton Greaves Consumer Electricals Ltd and Surya Roshini Ltd. Established relations with customers for more than a decade provide steady order flow, as revenue of company has grew at CAGR of 32% to Rs 155 crore in FY22 during past four years.
The financial risk profile of company is comfortable with estimated networth of over Rs 25 crore and gearing of below 1.1 times as on March 31, 2022. Debt protection metrics were comfortable too, with interest coverage and NCA/AD of 6 times and 30%, respectively in FY22. With schedule repayment of term loan, accretion of profit into networth and no large debt funded capex plan, financial risk profile expected to improve over the medium term.
Weaknesses:
The revenue of company estimated to grown from Rs 93 crore in FY21 to Rs 155 crore in FY22; however, remain moderate in the intensely competitive industry. Furthermore, key raw materials (tin and lead) accounts for around 79% of total production cost, even a slight variation in price can drastically impact the operating margin. However, instead of increase in raw material cost in past, company was able to sustain its margin at 11% to 12%. Hence, improvement and sustenance of operating margin will remain key monitoring factor.
Operations are moderately working capital intensive with GCA of 149 days in FY21 and are largely dominated by debtors of 89 days and moderate inventory of 21 days. Company extends credit period of around 90 days to established reputed customer base and holds around a month of inventory to meet requirement of business. However, portion of working capital requirement is being met through creditor of 1 month. Over the medium term, GCA days are expected to remain in range of 90-120 days. |
Liquidity: Adequate Liquidity is adequate with expected accruals of over Rs 12 crore against yearly maturing term debt repayment of Rs 2-3 crore over the medium term; surplus funds are expected to deploy towards incremental working capital requirement. Bank limit utilisation was moderate at 87.52% for the 12 months through May 2022. Current ratio was moderate at 1.39 times on March 31, 2021. The liquidity further supported by promoter support in form of infusion of funds. |
Outlook: Stable PAI will continue to benefit from extensive experience of its promoter, established market position, and comfortable debt protection metrics. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company PAI, incorporated in February 2007 by Mr Aadil Bavaadam Jal, manufactures a wide variety of solders, lead-free alloys and fluxes in various forms; these products are used in the electronic, electrical and automobile industries. Its facility is based in Vadodara, Gujarat. |
Key Financial Indicators
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Status of non cooperation with previous CRA: PAI has not cooperated with India Ratings And Research Private Limited which has classified it as non-cooperative vide release dated November 27, 2017 and with Credit Analysis & Research Ltd which has classified it as non-cooperative vide release dated Feb 25,2019 The reason provided is non-furnishing of information for monitoring of ratings by India Ratings And Research Private Limited and Credit Analysis & Research Ltd. |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||
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This Annexure has been updated on 30-Jun-22 in line with the lender-wise facility details as on 29-Jun-22 received from the rated entity.
Criteria Details
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