Press Release

Associated Industrial Furnaces Private Limited

February 07, 2023

Facilities/Instruments Amount (₹ crore) Rating1 Rating Action

5.68
Long Term Bank Facilities (Reduced from CARE B; Stable Reaffirmed
7.43)
Long Term / Short Term Bank CARE B; Stable / CARE Revised from CARE A4 (A
13.50
Facilities A4 Four)
Details of instruments/facilities in Annexure-1.

Rationale and key rating drivers

The ratings assigned to the bank facilities of Associated Industrial Furnaces Private Limited continues to remain constrained by
small scale of operations with order book execution picking up in current FY, leveraged capital structure, highly working capital-
intensive operations reflected by its vulnerable operating cycle and its presence in a highly fragmented and competitive nature of
the industry. The ratings; however, continue to derive strengths from long operational track record with experienced promoters
and healthy order book position reflecting satisfactory revenue visibility in near to medium term.

Rating sensitivities: Factors likely to lead to rating actions

Positive factors
• Execution of work contracts in a timely manner and collects receivables on timely and regular basis lead to improve
operating cycle below 120 days on a sustained basis.
• Increase in scale of operation (turnover above Rs.40 crore) and operating margin above 7.5% on a sustained basis.
Negative factors
• Delay in execution of work contracts and collection of receivables which lead to any further deterioration in operating
cycle on a sustained basis.

Analytical approach: Standalone

Key weaknesses

Small scale of operations with execution of orders picking up in 9MFY23

The total operating income has improved marginally from Rs.8.97 crore in FY21 to Rs.11.86 crore in FY22 and Rs.15.60 crore in
9MFY23. Order book execution has picked up in current FY post Covid-19 disruption in past two years. The company had reported
negative operating profit in FY21 on the back of sundry debtors written off amounting to Rs.4.23 crores. During FY22, the
company booked operating profit of Rs. 1.62 crores. However, PAT remained same at Rs.0.08 crore due to higher non-operating
income derived of sale of property in FY21.
In 9MFY23, the company has achieved total operating income of Rs.15.60 crore and management expect to achieve TOI of Rs.33
crore for FY23.

Leveraged capital structure and weak debt coverage indicators:

The overall gearing ratio had improved to 2.73x as on March 31, 2021 and further to 2.70x as on March 31, 2022 on account of
repayment of term loan. In 9MFY23, the promoters have infused unsecured loans amounting to Rs 2.15 crores which was utilised
for scheduled repayments of loan as well as prepayments of some of the term loans. Hence the secured term loan balance stood
at Rs. 1.68 crores as on January 02, 2023.
Although interest coverage stood negative in FY21, however, the same has now improved to 1.11x during FY22. Moreover, the
company has availed additional BGs of Rs. 10 crores for the execution of two major projects from NALCO and BALCO in current
FY.

Working capital intensive nature of operation:

The company executes orders for large corporates including government parties and the collections come with a delay leading to
high collection periods for last few years. Further with high debtors and sharp decline in total operating income led to further

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Complete definition of the ratings assigned are available at www.careedge.in and other CARE Ratings Ltd.’s publications

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 Press Release

deterioration in collection days in FY20 & FY21. Although o/s debtor levels improved from Rs.41.77 crore as on Mar 2021 to
Rs.30.86 crore as on Mar 2022, it again increased to Rs.43.66 crore as on Nov 2022. The o/s debtor level include escalation
receivable amounting to Rs. 20.76 crores from NFC India Ltd related to Hindustan Zinc Furnace Project for which NFC India is the
primary contractor and AIFPL is the sub-contractor. The company has gone to arbitration claiming the said amount and court
hearing is going on.

As a result, the operating cycle improved to 968 days in FY22 vis a vis 1476 days in FY21 on account of recovery of some long
pending trade receivables. Also, the company is availing high credit period from its sub-contractors which partial offsets its large
working capital requirements. Moreover, the average utilisation of fund-based limit stood around 80% during last 12 months
ended December 2022.

Highly competitive and fragmented nature of the industry:

The business of execution of turnkey contracts for supply, erection, commissioning and maintenance of heat treatment industrial
equipment’s for steel and aluminium plants is highly fragmented with a large number of small to medium scale organized and
unorganized players owing to low entry barriers. High competition in the operating spectrum and small size of the company limits
the scope for margin expansion.

Key strengths

Satisfactory order book position:

The company executes works for reputed entities like Steel Authority of India Limited, Hindalco Industries Limited, National
Aluminium Company Limited, Bharat Aluminium Company Limited etc. It has an order book position of Rs.167.67 crores as on
November 30, 2022 which is to be completed by March 2025. The revenue visibility seems to be satisfactory in medium term.

Long operational track record and experienced promoters:

The company is into execution of work contracts on turnkey basis since 1988 and has more than three decades of long track
record of operations. Mr. Saket Agarwal is associated with the company since 2007 and has over a decade of experience in the
same line of business and he looks after the overall operations of the company supported by directors Mr. Jagdish Prasad Kanoria
and Mr. Chetan Prakash.

Liquidity: Stretched
Liquidity is marked by low accruals against high repayment obligations, high fund-based limit utilisation. The existing cash accrual
are short to meet the repayment obligations; however, the promoters are infusing funds to meet the debt obligations. The
company mainly executes orders government entities and major funds remained block in debtors which insert pressure on its
liquidity. In 9MFY23, the promoters have infused unsecured loans amounting to Rs 2.15 crores which was utilised for scheduled
repayments of loan as well as prepayments of some loans. Currently, o/s term loan stands at Rs.1.68 crore which are mainly
payable in FY24 & FY25.

Applicable criteria
Policy on default recognition
Financial Ratios – Non -financial Sector
Liquidity Analysis of Non-financial sector entities
Rating Outlook and Credit Watch
Short Term Instruments
Service Sector Companies

About the company

Associated Industrial Furnaces Private Limited (AIFPL) was incorporated on January 03, 1989 by Mr. Saket Agarwal and others.
The company is engaged in execution of turnkey contracts for supply, erection, commissioning and maintenance of heat treatment
industrial equipment’s for steel and aluminium plants and caters to engineering, refractory manufacturing among other sectors.
The client profile of the company includes reputed names like Steel Authority of India Limited, Hindalco Industries Limited,
National Aluminium Company Limited, Bharat Aluminium Company Limited etc. The company has an order book position of
Rs.167.67 crores as on November 30, 2022.

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Brief Financials (₹ crore) March 31, 2021 (A) March 31, 2022 (A) 9MFY23 (U.A)

Total operating income 8.97 11.86 15.60

PBILDT -1.28 1.62 NA
PAT 0.08 0.08 NA
Overall gearing (times) 2.73 2.70 NA
Interest coverage (times) -0.85 1.11 NA
A: Audited; U.A: Unaudited; NA: Not Available

Status of non-cooperation with previous CRA:

NA

Any other information: NA

Rating history for the last three years: Please refer Annexure-2

Covenants of the rated instruments/facilities: Detailed explanation of the covenants of the rated instruments/facilities is
given in Annexure-3

Complexity level of the various instruments rated: Annexure-4

Lender details: Annexure-5

Annexure-1: Details of instruments/facilities

Coupon Maturity Size of Rating Assigned
Name of the Date of Issuance
ISIN Rate Date (DD- the Issue along with Rating
Instrument (DD-MM-YYYY)
(%) MM-YYYY) (₹ crore) Outlook

Fund-based - LT-Cash
- - - 5.00 CARE B; Stable
Credit

Fund-based - LT-Term
- - May 2024 0.68 CARE B; Stable
Loan

Non-fund-based - LT/ CARE B; Stable / CARE

- - - 13.50
ST-Bank Guarantee A4

Annexure-2: Rating history for the last three years

Current Ratings Rating History
Date(s) Date(s)
Name of the
Sr. and Date(s) and and Date(s) and
Instrument/Bank Amount
No. Rating(s) Rating(s) Rating(s) Rating(s)
Facilities Type Outstanding Rating
assigned assigned in assigned assigned in
(₹ crore)
in 2022- 2021-2022 in 2020- 2019-2020
2023 2021
1)CARE B;
Stable
(30-Mar-22) 1)CARE B;
CARE Stable; ISSUER
Fund-based - LT-
1 LT 0.68 B; - 2)CARE B-; - NOT
Term Loan
Stable Stable; ISSUER COOPERATING*
NOT (17-Mar-20)
COOPERATING*
(19-May-21)

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 Press Release

1)CARE B;
Stable
(30-Mar-22) 1)CARE B;
CARE Stable; ISSUER
Fund-based - LT-
2 LT 5.00 B; - 2)CARE B-; - NOT
Cash Credit
Stable Stable; ISSUER COOPERATING*
NOT (17-Mar-20)
COOPERATING*
(19-May-21)
1)CARE A4
CARE (30-Mar-22)
1)CARE A4;
Non-fund-based - B;
ISSUER NOT
3 LT/ ST-Bank LT/ST* 13.50 Stable - 2)CARE A4; -
COOPERATING*
Guarantee / CARE ISSUER NOT
(17-Mar-20)
A4 COOPERATING*
(19-May-21)
*Long term/Short term.

Annexure-3: Detailed explanation of the covenants of the rated instruments/facilities: Not Applicable

Annexure-4: Complexity level of the various instruments rated

Sr. No. Name of the Instrument Complexity Level

1 Fund-based - LT-Cash Credit Simple

2 Fund-based - LT-Term Loan Simple
3 Non-fund-based - LT/ ST-Bank Guarantee Simple

Annexure-5: Lender details

To view the lender wise details of bank facilities please click here

Note on the complexity levels of the rated instruments: CARE Ratings has classified instruments rated by it on the basis
of complexity. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any
clarifications.

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 Press Release

Contact us
Media contact
Name: Mradul Mishra
Phone: +91-22-6754 3596
E-mail: [email protected]

Analyst contact
Name: Punit Singhania
Phone: 9874341122
E-mail: [email protected]

Relationship contact
Name: Lalit Sikaria
Phone: + 91-033- 40181600
E-mail: [email protected]

About us:
Established in 1993, CARE Ratings is one of the leading credit rating agencies in India. Registered under the Securities and
Exchange Board of India, it has been acknowledged as an External Credit Assessment Institution by the RBI. With an equitable
position in the Indian capital market, CARE Ratings provides a wide array of credit rating services that help corporates raise capital
and enable investors to make informed decisions. With an established track record of rating companies over almost three decades,
CARE Ratings follows a robust and transparent rating process that leverages its domain and analytical expertise, backed by the
methodologies congruent with the international best practices. CARE Ratings has played a pivotal role in developing bank debt
and capital market instruments, including commercial papers, corporate bonds and debentures, and structured credit.

Disclaimer:
The ratings issued by CARE Ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to
sanction, renew, disburse, or recall the concerned bank facilities or to buy, sell, or hold any security. These ratings do not convey suitability or price for the investor.
The agency does not constitute an audit on the rated entity. CARE Ratings has based its ratings/outlook based on information obtained from reliable and credible
sources. CARE Ratings does not, however, guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions
and the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE Ratings have paid a credit rating fee,
based on the amount and type of bank facilities/instruments. CARE Ratings or its subsidiaries/associates may also be involved with other commercial transactions with
the entity. In case of partnership/proprietary concerns, the rating/outlook assigned by CARE Ratings is, inter-alia, based on the capital deployed by the
partners/proprietors and the current financial strength of the firm. The ratings/outlook may change in case of withdrawal of capital, or the unsecured loans brought
in by the partners/proprietors in addition to the financial performance and other relevant factors. CARE Ratings is not responsible for any errors and states that it has
no financial liability whatsoever to the users of the ratings of CARE Ratings. The ratings of CARE Ratings do not factor in any rating-related trigger clauses as per the
terms of the facilities/instruments, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and
triggered, the ratings may see volatility and sharp downgrades.

For the detailed Rationale Report and subscription information,

please visit www.careedge.in

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