Press Release

Amman TRY Sponge and Power Private Limited

January 25, 2021

Ratings
Amount
Facilities/Instruments Ratings Rating Action
(Rs. crore)
CARE BBB; Stable
Long-term Bank Facilities 5 Reaffirmed
(Triple B; Outlook: Stable )
CARE A3
Short-term Bank Facilities 15 Reaffirmed
(A Three )
20
Total Bank Facilities
(Rs. Twenty crore only)

Detailed Rationale & Key Rating Drivers

The ratings assigned to the bank facilities of Amman TRY Sponge and Power Pvt Ltd (ATSPL) continue to take into account
the significant experience of the promoters in the steel industry, long track record of operations of the Amman group in the
steel business and established market position with integrated nature of operations. The ratings also take note of the
group’s financial risk profile characterized by a stable operational performance, comfortable capital structure and debt
service protection metrics.
The ratings are, however, constrained on account of the commodity nature of the finished product, susceptibility of margins
to volatile raw material prices & foreign exchange rate fluctuations and cyclical nature of the steel industry.

Key Rating Sensitivities

Positive Factors
• Consistent improvement in PBILDT margin above the range of 7%-8%.
 Successful completion of the capex and scaling up of operations from the new capacities

Negative Factors
• Consistent deterioration in capital structure with gearing levels above 1.00x.
• Decline in PBILDT margins on a consistent basis below 4%

Detailed description of the key rating drivers

Key Rating Strengths
Experience of the promoters and long track record of operations
The Amman group was promoted by Mr S. P. Muthuramalingam who has an experience of more than three decades in the
steel industry and is the Chairman of the group. The group came into being when he established Amman Steel Corporation
(ASC) in 1978 for the trading of steel scrap. His son Mr Somasundaram (Managing Director of ATSPL) was instrumental in
establishing Shri Amman Steel & Allied Industries P Ltd (SASAI) and the other group companies. He is associated with the
group since 1999. SASAI was incorporated in 1998 and it is engaged in the manufacture and sale of Thermo-Mechanically
Treated (TMT) bars. Subsequently, the group also established another rolling mill in the name of Amman TRY Steels Private
Limited (ASPL) in 2006 engaged in the manufacture and sale of TMT bars. The promoters are involved in strategic decision
making while the day-to-day operations are largely delegated to a team of managers.
Established market position with partially integrated operations:
The group companies (SASAI and ASPL) are engaged in the manufacture and sale of TMT steel bars under the brand name
‘Amman TRY’, a recognized brand in Tamil Nadu catering mainly to the construction industry. With major portion of
ATSPL’s production being supplied to the group, and advance granted by the group companies to ATSPL for its working
capital requirements, there exist operational and financial synergies within the group. During FY20 (refers to the period
April 1 to March 31), around 90% of ATSPL’s total sales were to group companies as against 78% of the total sales during
FY19. The group also has two windmills with total capacity of 2500 kilowatts (kWh) in Tamil Nadu that satisfies around 50-
55% of the group’s power requirement.
Stable operational performance
The operating income witnessed a decline of 29% y-o-y to Rs.403.99 crore in FY20 from Rs. 508 crore in FY19 due to
decline in selling price of TMT bars & billets in the domestic market. Owing to drop in revenue with similar level of fixed
costs, the PBILDT margin moderated from 5.58% during FY19 to 4.89% during FY20 for the group. During FY20, due to high
demand, ATSPL operated at 127% capacity utilization levels. Hence, as a measure of the expanding the geographical

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presence, the group is adding a new rolling mill plant and capacity addition in billet production in ATSPL near its existing
billet plant at Nellore, Andhra Pradesh.
Comfortable financial position characterized by comfortable capital structure and debt service protection metrics
The capital structure of the group continued to remained comfortable with overall gearing at 0.25x as on March 31, 2020
against 0.36x as on March 31, 2019 with minimal term loan borrowings and low working capital utilizations.

Key Rating Weaknesses

Volatile profit margin due to commoditized nature of products
Due to commodity nature of the finished products and volatile raw material prices, profitability margins are low. The
group meets 90% of its power requirement from APGENCO and the remaining power requirements were catered to by
third parties through renewable PPA agreements. Power consumed per tonne of billets dropped by 10% from 868
units/tonne during FY19 to 776 units/tonne during FY20 through higher operational efficiency and use of better quality
scrap.
Raw material price risk and foreign exchange risk
Steel scrap is the major raw material consumed by ATSPL contributing around 60% of the total consumption by volume
and the rest is sponge iron. Prices of scrap are generally volatile in nature. Generally the company hedges around 100% of
its forex exposure anytime. During FY20, ATSPL made a forex loss amounting to Rs.32 lakh (FY19 – loss of Rs.19 lakh).

Liquidity: Adequate
The group has adequate liquidity characterized by sufficient cushion in accruals vis-à-vis repayment obligations of Rs. 1.77
crore in FY21 and cash balance of Rs.1.72 crore. The average working capital utilisation of limits stood comfortable at
12.09% for twelve months ended December 2020 supported by an above unity current ratio. Further, the group has not
availed any deferment of interest or taken any Covid loan under Covid relief measures prescribed by RBI.

Impact of covid and industry outlook

The group’s unit was shut down during the last week of FY20 and for a period of one week in the current year. Being a
continuous process industry, the units resumed operations thereafter after obtaining permission from the local authority.
Recovery in domestic demand has been slow due to migration of labour, supply-chain disruptions, prevailing lockdown in
many cities etc. With a pick-up in domestic demand import of finished steel has witnessed growth while exports have
declined. Domestic steel production and consumption is expected to remain steady going forward in H2FY21. For the
whole year FY21, CARE expects crude steel production to be lower by 10-12% and consumption to be lower by 14-17%,
mainly impacted by poor first half.

Analytical approach: Combined

CARE has combined the credit risk profile of Amman-Try Sponge and Power Private Limited (ATSPL) and its group
companies Shri Amman Steel and Allied Industries Private Limited (SASAI) and Amman Try Steels Private Limited (ASPL)
(hereafter referred to as the Amman group) as all the entities are engaged in a similar line of business, share significant
group synergies and operate under the same management.

Applicable Criteria
CARE’s methodology for manufacturing companies
Criteria on assigning Outlook and credit watch to Ratings
CARE’s Policy on Default Recognition
Criteria for Short Term Instruments
Financial ratios – Non-Financial Sector
Liquidity Analysis of Non-Financial Sector Entities
Rating Methodology – Consolidation
Rating Methodology – Steel industry
About the Company
ATSPL is part of the Tamil Nadu-based Amman group of companies, having interests in manufacturing steel ingots and
steel bars, local bus transportation and real estate. In order to meet raw material requirement of its group companies
SASAI and ASPL the group has established billet making unit under ATSPL. ATSPL was incorporated in September 2008 and
commenced commercial operations in July 2011. It is engaged in the manufacture of steel billets. ATSPL has a steel
melting shop in Nellore, Andhra Pradesh, with production capacity of 65,000 tonnes per annum (TPA) of billets.

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Brief Financials (Rs. crore) FY19 (A) FY20 (A)

Total operating income 281.28 282.04
PBILDT 11.29 10.68
PAT 6.46 6.09
Overall gearing (times) 0.47 0.36
Interest coverage (times) 17.04 11.95
A: Audited
Status of non-cooperation with previous CRA: NA
Any other information: NA
Rating History for last three years: Please refer Annexure-2

Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments/facilities is given in
Annexure-3
Complexity level of various instruments rated for this company: Annexure 4

Annexure-1: Details of Instruments/Facilities

Size of the Rating assigned
Name of the Date of Coupon Maturity
Issue along with Rating
Instrument Issuance Rate Date
(Rs. crore) Outlook
Fund-based - LT-Cash CARE BBB; Stable
- - - 5.00
Credit
Non-fund-based - ST- CARE A3
- - - 15.00
Letter of credit

Annexure-2: Rating History of last three years

Current Ratings Rating history
Name of the Type Rating Date(s) & Date(s) & Date(s) & Date(s) &
Sr. Amount
Instrument/Bank Rating(s) Rating(s) Rating(s) Rating(s)
No. Outstanding
Facilities assigned in assigned in assigned in assigned in
(Rs. crore)
2020-2021 2019-2020 2018-2019 2017-2018
1)CARE 1)CARE
CARE 1)CARE
BBB; Stable BBB; Stable
Fund-based - LT-Cash BBB; BBB; Stable
1. LT 5.00 - (13-Mar- (22-Mar-
Credit Stable (23-Feb-18)
20) 19)

1)CARE A3 1)CARE A3
1)CARE A3
Non-fund-based - ST- CARE A3 (13-Mar- (22-Mar-
2. ST 15.00 - (23-Feb-18)
Letter of credit 20) 19)

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

Annexure 4: Complexity level of various instruments rated for this company

Sr.
Name of the Instrument Complexity Level
No.
1. Fund-based - LT-Cash Credit Simple
2. Non-fund-based - ST-Letter of credit Simple
Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity.
This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome
to write to care@careratings.com for any clarifications

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Contact us
Media Contact
Name: Mr. Mradul Mishra
Contact no. – +91-22-6837 4424
Email ID – mradul.mishra@careratings.com

Analyst Contact
Name: Mrs. Swathi Subramanian
Contact no.: 0422 450 2399
Email ID: swathi.subramanian@careratings.com

Relationship Contact
Name: Mr. V Pradeep Kumar
Contact no. : 044 2850 1001
Email ID: pradeep.kumar@careratings.com

About CARE Ratings:

CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating
agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit
Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market
built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital
for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own
risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the
methodologies congruent with the international best practices.

Disclaimer
CARE’s 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. CARE’s ratings
do not convey suitability or price for the investor. CARE’s ratings do not constitute an audit on the rated entity. 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. CARE or its subsidiaries/associates may also have other commercial
transactions with the entity. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is, inter-alia, 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. CARE is not responsible for any errors and states that it has no financial liability whatsoever to
the users of CARE’s rating.
Our ratings do not factor in any rating related trigger clauses as per the terms of the facility/instrument, which may involve acceleration
of payments in case of rating downgrades. However, if any such clauses are introduced and if triggered, the ratings may see volatility
and sharp downgrades.

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