ICRA Reaffirms Ratings for Adishakti Alloys Private Limited

ICRA, a credit rating agency, has reaffirmed the long-term rating of [ICRA]B+ and the short-term rating of [ICRA]A4 for Adishakti Alloys Private Limited's (AAPL) cash credit and non-fund based bank facilities, respectively. The ratings reflect AAPL's small scale of operations, depressed debt protection metrics, and exposure to foreign exchange rate fluctuations. However, the company's established track record, repeat orders from customers, and moderate capital structure have positively influenced the ratings. AAPL's ability to grow its business and improve profitability through effective working capital management will remain a key rating sensitivity.

Key Takeaways:

ICRA has reaffirmed AAPL's long-term rating of [ICRA]B+ and short-term rating of [ICRA]A4 for its cash credit and non-fund based bank facilities.
The ratings reflect AAPL's small scale of operations, with a growth in turnover over the last couple of years.
Depressed debt protection metrics due to low profitability and a low value-additive nature of the business keep profit margins under check.
AAPL's exposure to foreign exchange rate fluctuations is a ratings concern due to its high dependence on imports for raw materials.
The ratings positively factor in AAPL's established track record, repeat orders from existing customers, and moderate capital structure.
AAPL's ability to grow its business and improve profitability through effective working capital management is a key rating sensitivity.

Statistics:

Rs. 7.25 crore cash credit facility
Rs. 14.45 crore non-fund based bank facility
1.11 times gearing as on 31st March, 2015
Net sales of Rs. 42.15 crore (provisional results) in 2014-15, with a profit after tax of Rs. 0.26 crore

Sources:

ICRA Limited, "Adishakti Alloys Private Limited Instrument Amount Rating Action Fund Based Limit - Cash Credit" (2015)