Press Release

Arya Steels Rolling (India) Limited

December 31, 2018
Ratings
Amount 1
Facilities Rating Rating Action
(Rs. crore)
CARE BB+; Stable
Long term Bank Facilities 18.00 Assigned
(Double B Plus; Outlook: Stable)
CARE A4+
Short Term Bank Facilities 6.00 Assigned
(A Four Plus)
24.00
Total (Rupees Twenty Four crore
only)
Details of facilities in Annexure-1

Detailed Rationale & Key Rating Drivers

The ratings assigned to bank facilities of Arya Steels Rolling (India) Limited (ASRIL) are constrained by the thin profitability
margin, moderate capital structure debt coverage indicators, susceptibility to cyclicality associated with steel industry
and dependence on end users of real estate and construction industry
The ratings derive strength from promoter’s experience in the field of iron and steel industry, growth in operating income
and established relationship with diversified clientele (distributors).
The ability to improve scale of operations, improve profitability and effectively manage working capital cycle in the
backdrop volatility in the steel prices

Detailed description of the key rating drivers

Key rating strengths

Experienced promoters in the field of iron and steel industry

ASRIL has a track record of more than ten years and is managed by the second generation entrepreneurs, Mr.Sumit
Singla, Mr.Ankur Singla and Mr.Alok Bansal who are actively involved in the company in the strength of directors. They
are commerce graduates and spearhead the company in various operations. The top management at ASRIL is ably
supported by a qualified and professional team who look after various activities such as production, procurement,
operations, marketing and branding.

Growing scale of operations

ASRIL registered a CAGR growth in total operating income of 10.02% to Rs.182.97 crore in FY18 as against Rs.151.17 crore
in FY16 led by increase in the sales volume and better sales realization. In H1FY19 the total operating income stood at
Rs.117.57 crore.

Established relationship with diversified clientele and suppliers

The company manufactures TMT Bars with the brand name of “Shirdi Sariya”, which is a well-known brand in various
southern states. ASRIL caters to diversified distributors who are key suppliers to the real estate and construction sector.
The clientele base includes local players like Ribco Steel (Mangalore), Shiva Steel (Hubli), Steel Trading House (Belgaum),
Nandi Steel (Hubli), RB Steel (Belgaum) etc. ASRIL has also channeled with various distributors in different states like
Karnataka, Maharashtra and Kerala to improve the reach of its products

Liquidity
Average cash credit utilization for 12 months ended September 2018 remained at ~80%. The cash balance as on March
31, 2018 stood at Rs.0.97 crore. The current ratio stood at 1.49 as on March 31, 2018.

Key Rating Weaknesses

1
Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE
publications.

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 Press Release

Low profitability, moderate capital structure and debt coverage indicators

The company’s profitability has been thin and fluctuating over FY16-FY18. PBILDT margin of ASRIL declined to 3.00 % in
FY18 (as against 3.58% during the FY17 and 3.12 % during FY16) due to increase in the raw material cost over the last
three years. PAT margin in FY18 stood at 0.55% .The debt profile of ASRIL constitutes mainly working capital borrowings.
ASRIL is not having any term loan except few vehicle loans. Lower reliance on debt, led to an overall gearing of 0.96x as
on March 31, 2018 from 1.05x as on March 31, 2016. Further, the total debt to GCA stood at 10.34x as on March 31, 2018
from 14.14x as on March 31, 2016. The interest coverage ratio stood at 1.84x during FY18.

Susceptible to cyclicality associated with steel industry

The key raw material required for the manufacturing bars is MS Billets which is procured at market-linked rates. Prices of
raw material as well as finished goods have always been volatile. ASRIL operates on moderate margin and raw material is
a major cost driver’s .Hence the company’s margins are sensitive to adverse movement in prices of finished goods and/or
raw materials. The ability of the company to pass on the price increase to its customers, with the competition existing in
this segment, is a key rating monitorable

Competition from organized & unorganized sector

ASRIL operates in an industry which comprises of several small players in the unorganized sector and is also characterized
by high degree of fragmentation. There also exist big sized players with established and integrated operations along with
strong marketing & distribution network resulting in intense competition in the industry. The industry is characterized by
low entry barriers and low level of product differentiation due to minimal technological inputs and availability of
standardized machinery for production. Therefore pricing is crucial for the company to garner customer especially with no
long term contracts. It remains to be seen how ASRIL will cope with these challenges in the medium term
Analytical approach: Standalone
Applicable Criteria
Criteria on assigning Outlook to Credit Ratings
CARE’s Policy on Default Recognition
Criteria for Short Term Instruments
Rating Methodology-Manufacturing Companies
Financial ratios – Non-Financial Sector
Rating Methodology - Steel Companies

About the Company

Arya Steels Rolling India Limited (ASRIL) was incorporated in 2008 by Late.Mr.Rajender Prasad Singla, the founder of
Singla group. The company is registered at Goa and the manufacturing facilities are located in Kolhapur, Maharashtra.
ASRIL is engaged in the manufacturing of Thermo-Mechanical Treatment (TMT) bars with an installed capacity of 90000
MTPA (Metric tons per annum). ASRIL is promoted by second generation entrepreneurs Mr. Sumit Singla and Mr. Ankur
Singla and Mr. Alok Bansal. They have more than a decade of experience in the field of manufacturing TMT bars. With the
advent of technology, in 2016 the company adopted Hot Rolling Process for manufacturing of TMT Bars efficiently
thereby reducing overall cost of production. The group company “Shri Balaji Rollings Private Limited” is associated with
steel billets manufacturing since 1997.

Brief Financials (Rs. crore) FY17 (Audited) FY18 (Audited)

Total operating income 136.56 182.97
PBILDT 4.89 5.48
PAT 0.68 1.01
Overall gearing (times) 1.11 0.96
Interest coverage (times) 1.63 1.84

Status of non-cooperation with previous CRA: NA

Any other information: Not Applicable

Rating History for last three years: Please refer Annexure-2
Analyst Contact:
Name: Mr. Ashish Kashalkar
Tel: 020- 40009003
Mobile: 9890615061
Email: ashish.kashalkar@careratings.com
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 Press Release

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Disclaimer
CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the
concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained
from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or
completeness of any information and is not responsible for any errors or omissions or for the results obtained from the
use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee,
based on the amount and type of bank facilities/instruments.
In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the
partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of
withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial
performance and other relevant factors.
Annexure-1: Details of Instruments/Facilities

Name of the Date of Coupon Maturity Size of the Rating assigned

Instrument Issuance Rate Date Issue along with Rating
(Rs. crore) Outlook
Fund-based - LT-Cash - - - 18.00 CARE BB+; Stable
Credit
Non-fund-based - ST- - - - 5.00 CARE A4+
Letter of credit
Non-fund-based - ST- - - - 1.00 CARE A4+
Bank Guarantees

Annexure-2: Rating History of last three years

Sr. Name of the Current Ratings Rating history

No. Instrument/Bank Type Amount Rating Date(s) & Date(s) & Date(s) & Date(s) &
Facilities Outstanding Rating(s) Rating(s) Rating(s) Rating(s)
(Rs. crore) assigned in assigned in assigned in assigned in
2018-2019 2017-2018 2016-2017 2015-2016
1. Fund-based - LT-Cash LT 18.00 CARE - - - -
Credit BB+;
Stable

2. Non-fund-based - ST- ST 5.00 CARE - - - -

Letter of credit A4+

3. Non-fund-based - ST- ST 1.00 CARE - - - -

Bank Guarantees A4+

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