Press Release

Aether Industries Limited

February 06, 2020

Rating Reaffirmed

Rs. 187.15 Cr.

Total Bank Facilities Rated*
(Enhanced from Rs. 125.88 crores)
ACUITE BBB / Outlook: Stable
Long Term Rating
(Reaffirmed)
ACUITE A3+
Short Term Rating
(Reaffirmed)
* Refer Annexure for details
Rating Rationale

Acuité has reaffirmed the long term rating of ‘ACUITE BBB’ (read as ACUITE triple B) and short term
rating of ‘ACUITE A3+’ (read as ACUITE A three plus) to the Rs. 187.15 crores bank facilities of AETHER
INDUSTRIES LIMITED (AIL). The outlook is ‘Stable’.

The Surat-based, AIL was incorporated in 2013 by Mr. Ashwin Desai and family. The company is
engaged in manufacturing of specialty chemicals. Further, it also provides contract research and
manufacturing services (CRAMS). AIL has two manufacturing units located in Surat with total installed
capacity of 2600 MT for specialty chemicals and 120 MT facility for CRAMS.

Analytical Approach
Acuité has considered the standalone business and financial risk profile of AIL to arrive at the rating.

Key Rating Drivers

Strengths

• Experienced management
AIL is promoted by Mr. Ashwin Desai, Mrs. Purnima Desai (his wife) and their sons, Mr. Rohan Desai
and Mr. Aman Desai. The family has been associated with the chemical industry for more than four
decades with Mr. Ashwin Desai being the founder of Anupam Rasayan (India) Limited (ARIL), which
is an established player in the chemical industry. The extensive experience of the promoters in the
chemical industry has helped the company to maintain healthy and long-standing relations with its
customers and suppliers, which in turn has helped the company secure repeat orders. This is well
reflected in revenue levels, which stood at Rs. 201.93 crore in FY2019 against Rs. 24.40 crore in FY2017.
Acuité believes that the company will be able to generate a healthy growth in revenues backed by
promoter’s technical expertise, new product innovation, niche products with limited competition,
increase in capacity utilisation and repeat orders from customers.

• Reputed clientele
Due to promoter’s extensive experience in the industry and strong relationship with customers, AIL
has managed to acquire reputed customers such as Byk Chemie GmBH, Divis Laboratories Limited,
Sun Pharmaceutical Industries Limited and Aarti Drugs Limited to name a few. AIL has registered
revenue of Rs.201.93 crore in FY2019 in its second full year of operations. Further, AIL recorded
revenue of ~Rs.146.00 crore till September 2019 and holds orders worth Rs. 192.00 crore approximately
as on date.

• Comfortable financial risk profile

AIL has comfortable financial risk profile marked by healthy net worth, moderate gearing and
coverage indicators. The net worth of AIL stood healthy at Rs. 72.18 crore as on March 31, 2019
(includes quasi equity of Rs. 9.04 crore) against Rs. 47.32 crore as on March 31, 2018 (includes quasi
equity of Rs. 7.58 crore). The increase in the networth is on account of healthy accretion to reserves
due to healthy profitability. The gearing of the company improved to 1.28 times as on March 31, 2019
against 1.98 times as on March 31, 2018. Although, the company is undergoing capex of Rs.95.00
crore (funded by mix of debt and equity), gearing is expected to improve further on account of

Acuité Ratings & Research Limited (erstwhile SMERA Ratings Limited) www.acuite.in
 healthy accretion of reserves in the near to medium term. The total debt of Rs. 92.09 crore as on
March 31, 2019 comprises long-term loans from bank worth Rs. 59.02 crore and short-term working
capital debt from bank of Rs. 33.07 crore. Interest Coverage Ratio (ICR) has improved considerably
to 4.25 times for FY2019 against 2.45 times for FY2018. Similarly, Debt Service Coverage Ratio (DSCR)
has improved to 3.56 times for FY2019 against 2.15 times for FY2018. The total outside liabilities to
tangible net worth (TOL/TNW) stood at 1.86 times as on March 31, 2019 against 2.33 times as on March
31, 2018. Further, the net cash accruals of the company stood healthy at Rs.29.50 crore for FY2019
against the debt obligation of Rs.8.30 crores.

Acuité believes that the financial risk profile of the company will continue to improve in the near to
medium term backed healthy order book position, further improvement in profitability and healthy
net cash accruals.

Weaknesses

• Working capital intensive nature of operations

AIL’s working capital operations are intensive marked by GCA days of 173 in FY2019 as against 178
days in FY2018. The GCA days are high on account of debtor and inventory days of 87 and 92
respectively. The company normally allows credit period of 75-90 days to its customers thereby
leading to high debtor days. Inventory days are high due to different variety of products the company
manufactures. The company gets around 45-60 days of credit period from its suppliers. The average
working capital utilization stood at ~83 per cent.

• Susceptibility of margins to forex risk

The company generates ~50 percent of its revenue through exports and imports ~40 percent of its
raw materials. Hence, it faces foreign exchange risk on account of currency fluctuations. Although,
the same is mitigated on account of presence of natural hedge and bank cover to the extent of 75
percent.

Rating Sensitivities
 Continuous improvement in the scale of operations while maintaining profitability leading to
improvement in overall financial risk profile.
 Stretch in working capital cycle leading to increase in working capital borrowing and weakening of
financial risk profile.

Material Covenants
1. Minimum DSCR of 1.50 times.
2. TOL / TNW <= 2x
3. Net FA / Term Debt >=1.5 times.
4. Term Debts / NCA <=4.5 times.
5. Current Ratio >=1.30 times.
6. Minimum ICR of 3.56 times.
7. Debt / EBITDA < 1.62 times

Liquidity Position: Adequate

AIL has adequate liquidity marked by healthy net cash accruals of Rs. 29.50 crore against maturing
debt obligations of Rs. 8.30 crore during FY2019. The operations are working capital intensive as marked
by gross current asset (GCA) days of 173 in FY2019 as compared to 178 days in FY2018. The cash credit
limit of the company remains utilized at ~80 per cent during the last six months period ended November
2019. The unencumbered cash and bank balances stood at Rs. 0.10 crore as on March 31, 2019. The
current ratio stood at 1.20 times as on March 31, 2019. Acuité believes that the liquidity of the company
will improve on account of increasing net cash accruals vis-a-vis maturing debt obligations, improving
financial risk profile and reducing reliance on external debt.

Outlook: Stable
Acuité believes that AIL will maintain a stable outlook over the medium term owing to its experienced
management and improving financial risk profile. The outlook may be revised to ‘Positive’ in case the
company registers healthy growth in revenue while maintaining profitability margins, improvement in
capital structure and working capital management. Conversely, the outlook may be revised to
‘Negative’ in case of decline in revenue, profit margins or deterioration in the financial risk profile and
liquidity position.

Acuité Ratings & Research Limited (erstwhile SMERA Ratings Limited) www.acuite.in
About the Rated Entity - Key Financials
Unit FY19 (Actual) FY18 (Actual)
Operating Income Rs. Cr. 201.93 108.69
PAT Rs. Cr. 23.30 7.77
PAT Margin % 11.54 7.15
Total Debt / Tangible Net Worth Times 1.28 1.98
PBDIT / Interest Times 4.25 2.45

Status of non-cooperation with previous CRA (if applicable)

None

Any other information

None

Applicable Criteria
• Default Recognition - https://www.acuite.in/view-rating-criteria-17.htm
• Financial Ratios And Adjustments - https://www.acuite.in/view-rating-criteria-20.htm
• Manufacturing entities - http://acuite.in/view-rating-criteria-4.htm

Note on complexity levels of the rated instrument

https://www.acuite.in/criteria-complexity-levels.htm

Rating History (Upto last three years)

Name of Instrument/ Amount
Date Term Ratings/Outlook
Facilities (Rs. Crore)
ACUITE BBB / Stable
Cash Credit Long Term 20.00 (Upgraded from ACUITE
BBB- / Stable)
ACUITE A3+
Bills Discounting Short Term 15.00 (Upgraded from
ACUITE A3)
ACUITE BBB / Stable
Cash Credit Long Term 16.00 (Upgraded from ACUITE
BBB- / Stable)
ACUITE BBB / Stable
Term Loan Long Term 41.15 (Upgraded from ACUITE
BBB- / Stable)
ACUITE BBB / Stable
Term Loan Long Term 9.20 (Upgraded from ACUITE
BBB- / Stable)
03-Jan-2020
ACUITE BBB / Stable
Standby Line of Credit Long Term 1.00 (Upgraded from ACUITE
BBB- / Stable)
ACUITE BBB / Stable
Proposed Bank Facility Long Term 4.53 (Upgraded from ACUITE
BBB- / Stable)
ACUITE A3+
Letter of Credit Short Term 8.00 (Upgraded from
ACUITE A3)
ACUITE A3+
Letter of Credit Short Term 10.00 (Upgraded from
ACUITE A3)
ACUITE A3+
Standby line of credit Short Term 1.00 (Upgraded from
ACUITE A3)
ACUITE BBB- / Stable
07-Jan-2019 Cash Credit Long Term 23.00
(Reaffirmed)

Acuité Ratings & Research Limited (erstwhile SMERA Ratings Limited) www.acuite.in
 ACUITE A3
Bills Discounting Short Term 5.00
(Reaffirmed)
ACUITE BBB- / Stable
Cash Credit Long Term 16.00
(Assigned)
ACUITE BBB- / Stable
Term Loan Long Term 52.58
(Assigned)
ACUITE BBB- / Stable
Term Loan Long Term 11.50
(Assigned)
ACUITE BBB- / Stable
Standby Line of Credit Long Term 2.00
(Assigned)
ACUITE A3
Letter of Credit Short Term 6.00
(Reaffirmed)
ACUITE A3
Letter of Credit Short Term 6.00
(Assigned)
ACUITE A3
Bank Guarantee Short Term 2.00
(Reaffirmed)
ACUITE BBB- / Stable
Proposed Bank Facility Short Term 1.80
(Assigned)
ACUITE BBB- / Stable
Cash Credit Long Term 16.00
(Assigned)
ACUITE A3
Bills Discounting Short Term 1.00
(Assigned)
12-Dec-2018
ACUITE A3
Letter of Credit Short Term 6.00
(Assigned)
ACUITE A3
Bank Guarantee Short Term 2.00
(Assigned)

*Annexure – Details of instruments rated

Name of the Date of Coupon Maturity Size of the Issue
Ratings / Outlook
Facilities Issuance Rate Date (Rs. Cr.)
Not Not Not ACUITE BBB / Stable
Cash Credit 20.00
Applicable Applicable Applicable (Reaffirmed)
Not Not Not ACUITE BBB / Stable
Cash Credit 35.00
Applicable Applicable Applicable (Reaffirmed)
Not Not Not ACUITE BBB / Stable
Term Loan 41.15
Applicable Applicable Applicable (Reaffirmed)
Not Not Not ACUITE BBB / Stable
Term Loan 9.20
Applicable Applicable Applicable (Reaffirmed)
Not Not Not ACUITE BBB / Stable
Term Loan 60.00
Applicable Applicable Applicable (Reaffirmed)
Standby Line of Not Not Not ACUITE BBB / Stable
1.00
Credit Applicable Applicable Applicable (Reaffirmed)
Proposed Long Not Not Not ACUITE BBB / Stable
1.80
Term Facility Applicable Applicable Applicable (Reaffirmed)
Not Not Not ACUITE A3+
Letter of Credit 8.00
Applicable Applicable Applicable (Reaffirmed)
Not Not Not ACUITE A3+
Letter of Credit 10.00
Applicable Applicable Applicable (Reaffirmed)
Standby Line of Not Not Not ACUITE A3+
1.00
Credit Applicable Applicable Applicable (Reaffirmed)

Acuité Ratings & Research Limited (erstwhile SMERA Ratings Limited) www.acuite.in
Contacts

Analytical Rating Desk

Aditya Gupta Varsha Bist
Head - Corporate and Infrastructure Sector Ratings Manager - Rating Desk
Tel: 022-49294041 Tel: 022-49294011
[email protected] [email protected]

Rishabh Mundada
Analyst - Rating Operations
Tel: 022-49294033
[email protected]

About Acuité Ratings & Research:

Acuité Ratings & Research Limited (Erstwhile SMERA Ratings Limited) is a full -service Credit Rating
Agency registered with the Securities and Exchange Board of India (SEBI). The company received RBI
Accreditation as an External Credit Assessment Institution (ECAI), for Bank Loan Ratings under BASEL -II
norms in the year 2012. Since then, it has assigned more than 6,000 credit ratings to various securities,
debt instruments and bank facilities of entities spread across the country and across a wide cross
section of industries. It has its Registered and Head Office in Mumbai.

Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated
as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's
independent assessment of whether to buy, sell or hold any security. Acuité ratings are based on the
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Acuité Ratings & Research Limited (erstwhile SMERA Ratings Limited) www.acuite.in